Semiconductor Makers Generate Renewed Enthusiasm On Wall St
September 15 2009 - 5:40PM
Dow Jones News
Makers of semiconductors and related equipment are getting a
second look on Wall Street this week, thanks in part to more
encouraging industrial output numbers, with special attention for
Teradyne Inc. (TER) and Avago Technologies (AVGO).
Bullishness on semiconductors isn't new on the Street, with
Caris & Co. and Wachovia analysts among the voices forecasting
stronger demand as long ago as July.
But a cluster of upgrades Tuesday suggested a new focus on the
sector, as Avago shares rose 3.2% to $17.18 and Teradyne rose 11.5%
to $9.22.
Visiting makers of semiconductors and components in Asia this
week, Oppenheimer analyst Rick Schafter told clients that most
companies hinted third-quarter sales are ahead of original
expectations, while colleague Gary Hsueh detected "general
tightness" in semiconductor test equipment.
Teradyne "is now ripped, with big muscles" to deliver earnings
in 2010, Hsueh told clients in a Tuesday note.
Oppenheimer raised its rating on Teradyne to outperform from
perform, citing the test equipment plus new business from Qualcomm
(QCOM) and fourth-quarter order visibility.
Also Tuesday, analysts at Deutsche Securities, Barclays, Morgan
Stanley and Citigroup opened coverage of Avago, a day after
Standard & Poor's upgraded its credit rating on the former
semiconductor division of Hewlett-Packard Co. (HPQ) and Agilent
Technologies (A).
Avago has logged 2% compound growth since 2005, compared to the
industry's 3% contraction over that period, Deutsche Securities
analysts Ross Seymore, Sukhi Nagesh and Bob Gujavarty wrote as they
issued a buy rating on the stock.
Barclays analyst Romit Shah, who also issued a buy rating, said
he expects Avago to grow faster than the overall market in
2010.
Global semiconductor sales are on track to shrink 15% to 20% in
2009, he noted. But Avago's sales are expected to shed a smaller
13%, Shah wrote in a Tuesday note to clients.
Morgan Stanley, which issued a third Avago buy rating, said the
company has "finally been set to realize its full potential," while
Citigroup analysts sounded a more cautious note as they started
their coverage with a hold.
"Wireless has generated the lions' share of growth the past few
years, so we might become more constructive on Avago if a better
balance in business growth manifests," Citigroup analyst Terence
Whalen wrote.
-By Brendan Conway, Dow Jones Newswires; (212) 416-2670;
brendan.conway@dowjones.com