Semiconductors Being Smothered By 'Horrible Headlines'
In a report published Friday, JPMorgan analysts commented on the semiconductor space, noting that Thursday's rebound was driven on some "better-than-expected" earnings reports, but investors (mostly "faster-money" investors) are now using the bounce to take profits off the table.
"The semi news overnight was mostly fine (Maxim Integrated Products Inc. (NASDAQ: MXIM) was the overnight upside highlight while the rest can be placed in the "no-worse-than-Linear Technology Corporation (NASDAQ: LLTC) camp) but looking bigger picture the industry at the moment is being smothered by horrible headlines," the analysts stated.
The analysts continued that non-iPhone wireless is "pretty bad," while at the same time Apple Inc. (NASDAQ: AAPL)'s smartphone sales growth is expected to decelerate. JPMorgan's analysts are now modeling 21 percent growth in September and "only" single-digit growth in not only in September's quarter, but in December, March 2016 and June 2016 quarters.
Meanwhile, the PC market has "stunk for months" and aren't showing any "tangible signs of stabilization." Wireless equipment (like PCs) has been "bad for a while" with no indication of "showing many signs of life." The equipment space was "hit hard" by Intel Corporation (NASDAQ: INTC)'s revised capital expenditure and 14nm pushout, raising the question of whether DRAM/NAND will expand at their scheduled pace if pricing continues to weaken.
With all that said, the analysts took a bold position and argued that the group's index (PHLX Semiconductor (INDEX: SOX) "remains a group that should be bought when things look bleakest" (which is it is right now) and sold at "peaks of euphoria."
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