Susquehanna Slashes Memory/Drive Semiconductor Names: Here's Why

Mehdi Hosseini of Susquehanna Financial Group made the case on Monday for investors should be incrementally more cautious on the Memory/Drive Semiconductor names following a series of meetings he had last week with executives in China and Taiwan. According to Hosseini, his meetings in China and Taiwan suggest quarterly smartphone and tablet unit shipments are tracking flat-to-down in the second half of 2015. The analyst added that when combined with "elevated" chipset related inventories, the sector will see an adverse impact. On the other hand, Hosseini noted that PC unit shipments appear to be "forming a bottom" following a "complete meltdown" in the front-half of 2015. In fact, the analyst is now projecting flat-to-up PC unit shipments in the third quarter followed by a low-single-digit decline in the following quarter. "Given the double-digit decline in Client SSD average selling prices (ASPs), we also expect continued penetration of SSDs into NBs," Hosseini wrote. "In this context, we expect blended NAND ASPs in 3Q to decline 15 percent quarter over quarter, worse than the 10-12 percent decline for DRAM. This trend is expected to sustain into 4Q. We also expect 3Q HDD TAM of 115M, up three percent quarter over quarter as some inventory refresh takes place, followed by a low-single-digit decline in 4Q."

Hosseini made the following price target changes: