Semiconductor Investors: Check Out This Morgan Stanley Survey

Morgan Stanley commented on semiconductor stocks Monday and noted “mixed trends by product categories” in a recent distribution survey.

Analysts led by Joseph Moore noted that distribution expectations from “survey respondents for MCU and Connector markets ticked down from three months ago, with only 30 percent and 18 percent of respondent expecting 1Q growth, down from 44 percent and 28 percent when asked about 1Q expectations in December.”

Growth expectations for Analog in Q1 were unchanged from December and mostly in-line with semi company guidance.

Customers also expected to keep inventory flat in Q1 while distributors were not building inventory either despite what is has been a seasonally a strong time.

Inventory conditions remained tight as 46 percent of respondents indicated they would face difficulties in fulfilling orders if demand accelerated.

The analysts remained “selectively bullish” on several stocks and avoided chasing any one group that that already outperformed in 2015.

Moore liked Fairchild Semiconductor Intl Inc FCS, which was viewed “as a structural margin expansion story on its fab consolidation initiative” with an “improving end market mix.”

The analysts also liked TE Connectivity Ltd TEL as it had improved “OMs driven in part by a rebound in its Subsea Communications business and the sale of its networks business sale.”

In the near-term, Maxim Integrated Products Inc. MXIM looked “positive on the back of GS6 builds” and it Moore would not suggest shorting the stock “given the proclivity towards M&A in the group.”

The analysts were also “modestly above company guidance” on Avago Technologies Ltd AVGO for the current quarter and remained “constructive” on the stock due to “solid secular growth in premium filters.”