Longbow Research: These Semiconductor Stocks Have Downside

In a report published Friday, Longbow Research analyst Shawn Harrison discussed the semiconductor space, noting that he sees downside to Street forecasts for the remainder of 2015 given an "increasingly cautious" view of the space. According to Harrison, investors could be overplaying the near-term benefit from the launch of Windows 10 as well as a rebound in PC demand.

Harrison noted that three trends continue to emerge: 1. PC orders are still weak and consistent with concern over second half 2015 Street semiconductor forecasts. 2.

's iPhone 6 production is tracking better than expected, resulting in the company taking share. 3. Foreign exchange driven price increases in Europe (three to five percent) are still occurring in Europe, but original equipment makers (OEMs) are "pushing back."

Shares of

were downgraded to Neutral from Buy to reflect the analyst's concerns that Street forecasts for the company's back-end of 2015 are "overly bullish," particularly with respect to PC demand. Shares of

and

were both maintained at Neutral as a weaker U.S. industrial export activity and the analyst's lower book-to-bill ratio (from his checks with industry contacts) serve as a "modest drag" that limit the ability of both companies to deliver upside to expectations. Shares of

were maintained with a Buy rating and $24 price target following mixed checks. On the one hand, Apple share gains and order upside will mitigate the counterbalancing trends with

(due to its increased charging content in the Galaxy S6) and Chinese OEMs. On the other hand, the company completed a $18 million buyback and expectations of a new $150 million buyback authorization should support shares. Finally, shares of

VSH

were maintained with a Neutral rating given a more cautious view of the PC market when combined with the company's restructuring actions ($23 million in the first half of 2016) implies shares will trade near book value absent the catalyst of a large restructuring program.