Market Overview

How'd Semiconductor Earnings Season Play Out?

How'd Semiconductor Earnings Season Play Out?

Citi commented on semiconductor stocks following the Q1 earnings season.

Analysts led by Christopher Danely noted that currency headwinds were “negatively impacting the semiconductor sector a little worse than we expected,” and the analysts believed semiconductor stocks “could experience an additional selloff.”

Overall, however, Danely remained “constructive on the group” and felt that adverse EPS revisions were “mostly over.”

“We believe the global economy drives the group, and with stable GDP growth in 2015 we are positive on the semiconductor sector,” according to Danely, and the firm expected total semi revenue to grow 5 percent year-over-year in 2015 “driven by the stable economy.”

Looking ahead, the analysts also noted that aggregate large-cap semiconductor operating margins were 23.7 percent, which was below the previous peak of 30.8 percent. As a result, the analysts believed “there is room for upside in earnings and therefore stock prices.”

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Microchip Technology Inc. (NASDAQ: MCHP) was among the stocks offering “the highest gross and operating margin leverage” in the firm’s large-cap semiconductor universe. The firm maintained a Buy rating and $58 price target.

Linear Technology Corporation (NASDAQ: LLTC) was rated a sell with a $39 price target. The analysts felt it was the “least shareholder friendly management team in semis” and had the “highest margins yet lowest payout ratio and no impetus to change that or increase cash usage.”

ON Semiconductor Corp (NASDAQ: ON) was rated Neutral with a $13 price target. Out of 10 semi stocks Citi ranked, ON could fall anywhere between a 5 to 8, according to the analysts, as FX could adversely impact sales and its Sanyo business was seen as volatile.

Maxim Integrated Products Inc. (NASDAQ: MXIM) was also rated Neutral with a $35 price target. The analysts said that “iPhone 6 strength along with some positive investor sentiment” made them “nervous,” however, there could be a “rapid (albeit short-term) turnaround in 2Q15 with [the] Galaxy S6 launch and Apple Watch.”

Semiconductor stocks largely fell Tuesday, with Citi’s “Top Pick” and Buy-rated Microchip Technology trading at $48.31, down 1.09 percent.

Posted-In: Christopher Danely CitiAnalyst Color Analyst Ratings Trading Ideas Best of Benzinga


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