By Benjamin Pimentel
Broadpoint AmTech downgraded the semiconductor sector on
Wednesday, saying investors "should take a more measured approach
to semiconductor investing and play a little defense at this time
of year."
Broadpoint AmTech analysts, led by Doug Freedman, also
downgraded shares of Advanced Micro Devices Inc. (AMD), Nvidia
Corp. (NVDA) and Analog Devices Inc. (ADI) to neutral from buy.
In recent trading, shares of AMD fell 1.5%, while Nvidia was
down 3.3% and Analog Devices was off 3.1%. The Philadelphia
Semiconductor Index was up a fraction.
In downgrading the sector to equal weight from overweight,
Broadpoint AmTech said it was responding to "a faster than expected
recovery to demand levels in both the PC [personal computer] and
[telephone] handset space."
Many makers of semiconductors have seen sequential gains in
sales recently due mainly to what analysts say was an inventory
correction following the economic downturn as manufacturers scaled
back chip supplies to levels below real demand.
Over the past months, chip companies have seen business rebound
as manufacturers worked to match semiconductor supplies with end
demand.
"The semiconductor market is likely to continue to recover and
may see better than expected September and December results -
likely driven by supply chain balancing as there are now spot
shortages causing buyers to rebuild depleted inventories and
increase the order rates (potentially above demand levels),"
Broadpoint AmTech said.
But it added that, "Given the volatility of the semiconductor
sector and early cycle multiples being applied, we believe there is
a good risk of inflated expectations (and slower than expected
growth - maybe even pronounced seasonality) as a result of order
adjustments required to match sell-through rates."
Meanwhile, memory chip maker SanDisk Corp. (SNDK) got upgraded
to buy by Broadpoint AmTech analyst Dinesh Moorjani, who said that
"the Street's under-appreciation of SanDisk's earnings recovery is
difficult to ignore."
The semiconductor market has been reeling from an oversupply of
memory chip products such as NAND Flash processors, used for such
devices as MP3 music players, and DRAM processors, used for
personal computers, which has led to declining average selling
prices.
But Moorjani said "NAND pricing has moved higher in the spot and
contract markets recently, driven by strength in demand from the
handset and MP3 player markets."
Shares of SanDisk were recently ahead 2.4%.
-By Benjamin Pimentel; 415-439-6400;
AskNewswires@dowjones.com