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Bank Of America Analyst Sees Slower FY15 Growth For Semiconductor Group

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Bank Of America Analyst Sees Slower FY15 Growth For Semiconductor Group
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Sales growth in the semiconductor industry will slow down next year by roughly a third but still expand by nearly 7 percent, an analyst said Friday.

The sector's low stock-price correlation to oil volatility, along with buybacks and dividends supported by strong cash flow, will help provide ongoing attraction to investors, Bank of America's Vivek Arya said.

In a wide-ranging sector review, Arya maintained a generally bullish outlook but warned that 2015 returns from the group will be lower than the average of 26 percent seen during the past year.

Moreover, market volatility in the sector will increase, driven by factors like a slowdown at Apple, swings in the energy market and an increasing imbalance between U.S. and foreign growth rates.

Certain stocks will get driven higher by a continued consolidation trend among the roughly 140 companies in the industry, as interest rates remain low and investors demand increasing scale to justify hefty research and development costs.

Related Link: Qualcomm Bucks Short Interest Trend In Semiconductor Stocks

Arya's six continued favorite stocks are heavily exposed to growth in either consumer markets, in cloud data centers or the automotive industry.

Among best bets related to mobile data, Arya cites Avago Technologies Ltd (NASDAQ: AVGO), Skyworks Solutions Inc (NASDAQ: SWKS) and RF Micro Devices, Inc. (NASDAQ: RFMD).

Top pick with data center exposure: Intel Corporation (NASDAQ: INTC), while for mobile transaction, chip-card security and automotives, Arya likes NXP Semiconductors NV (NASDAQ: NXPI).

For strong capital returns and consistent results, Arya cited Texas Instruments Incorporated (NASDAQ: TXN).

On his long list of stocks, Arya downgraded five, citing a lack of catalysts to drive their prices higher.

Downgrades to Underperform, from Neutral, included Maxim Integrated Products Inc. (NASDAQ: MXIM), Xilinx, Inc. (NASDAQ: XLNX) and Atmel Corporation (NASDAQ: ATML).

For similar reasons, Arya also cut his rating to Neutral, from Buy, on Linear Technology Corporation (NASDAQ: LLTC) and Altera Corporation (NASDAQ: ALTR)

Arya also upgraded NVIDIA Corporation (NASDAQ: NVDA) to Neutral, from Underperform, citing its exposure to data center growth and the automotive industry.

Arya noted however, that a key NVIDIA royalty agreement with Intel may expire in 2016.

Latest Ratings for AVGO

DateFirmActionFromTo
Jan 2019Morgan StanleyMaintainsEqual-WeightEqual-Weight
Dec 2018UBSMaintainsBuyBuy
Dec 2018BMO CapitalMaintainsMarket PerformMarket Perform

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Posted-In: Bank of America Vivek AryaAnalyst Color Long Ideas Upgrades Downgrades Analyst Ratings Trading Ideas Best of Benzinga

 

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UPDATE: Bank Of America Downgrades Xilinx