Bank of America remains bullish on semiconductor stocks heading into the fourth quarter, but the firm issued three semi stock downgrades Friday and said stock selection is critical at the moment.
The Semiconductor Analyst:
Analyst Vivek Arya issued the following ratings and price target changes:
- Synopsys, Inc. SNPS downgraded from Neutral to Underperform, $315 target reiterated.
- Cirrus Logic, Inc. CRUS downgraded from Neutral to Underperform, $92 target reiterated.
- Cree, Inc. CREE downgraded from Neutral to Underperform, $93 price target reiterated.
- KLA Corp KLAC reiterated Buy rating, price target raised from $425 to $450.
- Microchip Technology Inc. MCHP reiterated Buy rating, price target raised from $170 to $185.
- NVIDIA Corporation NVDA reiterated Buy rating, price target raised from $260 to $275.
- Nova Ltd NVMI reiterated Buy rating, price target raised from $120 to $125.
- ON Semiconductor Corp ON reiterated Buy rating, price target raised from $55 to $60.
The Semiconductor Thesis: In the new note, Arya said he remains bullish on the long-term outlook for the semiconductor industry overall given its critical role in digitizing the global economy.
“While we see deceleration in some end-markets (smartphones, PCs) and supply constraints in others (autos), it’s offset by rising content and pricing power in other hotspots,” Arya wrote.
He named Nvidia, Advanced Micro Devices, Inc. AMD, Marvell Technology Inc MRVL and Broadcom Inc AVGO as his top fourth-quarter semiconductor stock picks in the computing space.
ON is Arya’s top stock pick in the auto space, while KLA is his top pick among stocks that benefit from rising costs and complexity of chipmaking.
Benzinga’s Take: Semiconductor stocks have been spectacular investments overall in recent years, but Arya’s analysis highlights that some stocks are clearly better-positioned than others to maintain their bullish momentum.
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