Oppenheimer Likes Avago, Skyworks Solutions; Upgrades Marvell And Downgrades Broadcom

In a report published Monday, Oppenheimer analyst Rick Schafer previewed the Technology/Semiconductors & Components space, noting that recent checks to Asia uncovered "limited momentum" heading in to the second half of 2015 as slow PC, handset, wireless communications and mixed industrial data "conspire to keep a lid" on a growth and upside. On the other hand, the analyst stated that RF and automotive remain two "stand-out bright spots," driven by sustained semi content increases.

Schafer continued that picking stocks in the sector remains "increasingly critical" and his top picks in the wireless sector include Avago Technologies Ltd AVGO and Skyworks Solutions Inc SWKS which are both considered to be "the best diversified plays on increased RF complexity/content."

"Rising RF complexity (and content) remains one of our favorite thematic plays heading into 2H15," Schafer wrote. "We see incremental RF content opportunities for both Avago and Skyworks on the forthcoming iPhone 6s, with the latter likely see 15 percent plus. Skyworks further benefits from 50 percent plus 4G reference design share with China's major baseband suppliers."

PC Weakness

Schafer also commented on the PC segment and stated that weakness in the sector has been "well telegraphed" this year and will likely weigh on Advanced Micro Devices, Inc. AMD, Intel Corporation INTC and NVIDIA Corporation NVDA fundamentals in the bottom half of 2015.

Estimate & Rating Changes

Due to the softness across the PC and Samsung supply chains, Schafer cut his earnings per share estimates for Intel, Maxim Integrated Products Inc. MXIM and Nvidia. The analyst also downgraded Broadcom Corporation BRCM as shares are now trading on the arbitrage following the proposed Avago merger. Finally, shares of Marvell Technology Group Ltd. MRVL were upgraded as most, if not all, of the bad news is priced into shares.

Below is the summary of changes:

• Intel 2015 EPS lowered to $1.91 from a previous $2.07.
• Maxim 2015 EPS lowered to $1.68 from a previous $1.74.
• Nvidia 2015 earnings per share lowered to $0.68 from a previous $0.74.
• Shares of Broadcom were downgraded to Perform from Outperform with no assigned price target.
• Shares of Marvell were upgraded to Perform from Underperform with no assigned price target.