KeyBanc Sees Semiconductors' Recessionary Fears Largely Priced In; Gives Out Top 5 Picks

  • KeyBanc analyst John Vinh's quarterly semiconductor cycle analysis highlighted certain aspects.
  • Firstly, he saw the current correction in the SOX essentially already appears to reflect risks associated with a recession, with the current 52% contraction in forward P/E multiples beating the 48% peak-trough observed during the 2008- 2009 recession.
  • Secondly, the Q1 IC shipments remained strong, while the China lockdowns negatively impacted May shipments.
  • Thirdly, aggregate supply chain inventories increased further, above historical levels for the third time in this upcycle— with inventories likely to increase further in 2Q, he saw a higher risk of a correction.
  • Fourthly, he slightly raised his 2022 IC revenue forecast to +14% from +13% prior, with better pricing offsetting lower units. 
  • He noted that despite indications of an upcoming correction and recessionary fears, the peak-trough analysis would suggest that the current pullback already reflected many of these concerns. 
  • He favored Advanced Micro Devices, Inc AMD (reiterated Overweight; PT $130), Marvell Technology, Inc MRVL (maintained Overweight; PT $90), Nvidia Corp NVDA (reiterated Overweight; PT $230), ON Semiconductor Corp ON (maintained Overweight; PT $80), and Qualcomm Inc QCOM (reiterated Overweight; PT $220).
  • Price Action: AMD shares traded lower by 4.16% at $87.32 on the last check Friday.
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