ISI Bullish on Semi-Conductors, Offers Top Picks

On Friday, ISI initiated coverage on the Semiconductor sector. Analyst C.J. Muse believes the sector is “set up for beat and raises, largely speaking, for the next 4 to 6 quarters into 2015,” which has already been anticipated by the market. However, the analyst believes the bullish estimates can still be attained and beaten. Muse sees 6-7 percent growth as worldwide GDP re-accelerates. Other boosts to the sector could come from “mobility cannibalization largely complete, mature markets re-accelerating and a risk in silicon intensity, and the Internet of Things and Auto driving increased silicon content,” according to the analyst. Some of the weaker points to the sector include “few product cycles to drive above-average growth and ongoing weakness in PC and Mobility while ASPs weighing on consumer markets.” Muse's top picks in the sector are:

The analyst favors Micron in the DRAM industry and “permanent structural change in DRAM dynamics plus improving pricing environment that should enable higher GM's plus excellent exposure to the right product cycles in NAND.” Muse estimates consistent free cash flow of $2.50-$3.5 in calendar years 2014-16. NXP has “transformed itself from a margin expansion/deleveraging story to now a secular growth/FCF story driven by growth in ID (mobile transactions, NFC, authentication), greater penetration into Apple and Samsung GS5 as well as good leverage to core industrial growth areas." The analyst is not as bullish on:

Other stocks receiving coverage are: