Supply Side Discipline In Semiconductors Should Drive Healthy Fundamentals In 2Q/3Q: Goldman Sachs

Goldman mentions, “2Q’10 earnings season for our Semi/ SPE coverage universe kicks off next week with reports from Intel, AMD, and Novellus. We expect 2Q’10 results to be in-line with current Street estimates and reflect above seasonal sales trends in semis, despite end demand choppiness during the quarter. We expect 3Q’10 guidance for companies with heavy PC/handset exposure to be below seasonal off of a higher 2Q’10 base given the continued macro uncertainty but in-line with current Street estimates, which already reflect below seasonal revenue growth in 3Q’10.” “On the SPE side, we believe that Street estimates remain too low and see room for meaningful upside post earnings. We have increased confidence in SPE order momentum continuing through 2011 driven by (1) increased foundry investment, with TSMC likely to raise its 2010 capex given the current capacity tightness, (2) continued DRAM investment with Nanya and Inotera recently raising their 2010 capex budgets, and (3) accelerated NAND spending, which is now evident in the orders Micron is placing,” the analysts say. Goldman adds, “Our favorite SPE names remain LRCX, TER, AMAT, and KLAC. In Semis, we favor BRCM, TXN, ADI, LLTC, ONNN, MRVL, and MU, all Buy.” LRCX, TER, AMAT, and KLAC. In Semis, we favor BRCM, TXN, ADI, LLTC, ONNN, MRVL, and MU See Some of the Top Moving Indexes