jiefeng jiang
Some parts of the semiconductor industry are already experiencing a “widespread correction”, including some of the largest verticals, but investment firm Morgan Stanley said the wider industry is unlikely to feel the pinch. pain until next year.
A team of analysts, led by Joseph Moore, noted that there would likely be an inventory correction in the semiconductor space. There have already been “a few pockets of weakness”, but analysts note that the stock market shake-up “is likely to be pervasive, across all markets”.
Digging deeper, the team noted that there are demand issues, widely seen in consumer electronics markets, especially in PC games and, to some extent, console games. And there are fears that the shutdowns in China could lead to lingering supply chain problems, which could be positive for the sector. However, demand is still negative and in regions like Malaysia and the Philippines.
Looking at specific companies, Morgan Stanley noted that Advanced Micro Devices (NASDAQ:AMD) has a strong market share, but the investment firm has lowered its estimates for the Lisa Su-led company. However, the firm also noted that AMD (AMD) is on schedule with its Genoa product line, which should help the company continue to gain market share as the main rival Intel (NASDAQ:INTC) is experiencing delays with its Sapphire Rapids chipsets.
Morgan Stanley lowered its 2022 earnings estimate on AMD (AMD) to $4.02 per share from $4.24 per share, and also cut its 2023 estimate to $4.40 per share from $4.72 per share.
“Although there is some concern that these numbers need to be reduced, we note that this is still higher than where our estimates started. [2022]“wrote the Morgan Stanley analysts, who added that AMD (AMD) shares are down 57% this year, which is “in line with names where the numbers have already fallen significantly.”
Regarding Qualcomm (NASDAQ:COMQ), which recently said its pipeline of design wins in its automotive business grew from $19 billion to $30 billion, Morgan Stanley said it was “slightly below consensus” for the fourth quarter and next year, but the The stock’s valuation is “very compelling” and the indication is that recent price increases should hold.
GlobalFoundries (NASDAQ:SFP) should continue to benefit from ongoing trade tensions, Morgan Stanley said, noting that the foundry shortage has helped provide greater visibility to its customers and GlobalFoundries (SFP) is likely to continue to benefit by becoming “a partner of choice as it transitions its business model.”
western digital (WDC) should continue to see “very soft” NAND trends and the company should lose money in the December quarter, as it is the company with “the most significant challenges” in the near term, Morgan Stanley added. .
Microchip technology (MCHP) is taking advantage of the current environment to help deleverage its business and Morgan Stanley sees the company’s earnings performing “in line” with other broad-based companies when the recession hits. Microchip (MCHP) has been able to generate enough cash in the current period, which could put it in a favorable light with investors.
Top-spending companies, such as Intel (INTC) and Micron technology (MU), are considered “inexpensive” based on price/earnings ratio and book value, but in terms of free cash flow, they seem more expensive.
Equipment stocks, such as Lam Research (LRCX) and applied materials (AMAT) are likely to see “more choppy waters” ahead, but they are also likely to preserve cash flow, even with an expected 20-25% decline in wafer fabrication equipment spending next year.
Earlier this month, investment firm Stifel began covering advanced micro-devices (AMD), highlighting the company’s strong execution and an “expanding intellectual property portfolio”.