Semiconductor stocks have taken a big hit so far in 2022, and one Wall Street analyst just adjusted his ratings on six semis heading into the second half of the year.
The Analyst: Bank of America analyst Vivek Arya made the following seven ratings changes on Wednesday:
- Downgraded Skyworks Solutions Inc (NASDAQ:SWKS) from Neutral to Underperform, cut price target from $130 to $105.
- Downgraded Qorvo Inc (NASDAQ:QRVO) from Neutral to Underperform, cut price target from $125 to $95.
- Downgraded Teradyne, Inc. (NASDAQ:TER) from Buy to Neutral, cut price target from $140 to $110.
- Downgraded Texas Instruments Incorporated (NASDAQ:TXN) from Buy to Neutral, cut price target from $190 to $175.
- Upgraded Cadence Design Systems Inc (NASDAQ:CDNS) from Underperform to Neutral, raised price target from $160 to $175.
- Upgraded Synopsys, Inc. (NASDAQ:SNPS) from Underperform to Neutral, raised price target from $325 to $360.
- Related Link: More Trouble For Semiconductor Industry's Revival as Japanese Chipmakers See Engineers Shortage
- The Thesis: In the new note, Arya said the outlook for the semiconductor industry as a whole has worsened, but there are pockets of opportunities for semi stock pickers. In particular, Arya is bullish on the three themes of cloud computing, autos and rising chip complexity.
"We see semis as a high-quality, consolidated industry capable of growing ~2x versus global GDP, while producing 20-25% FCF margins (2x+ vs SPX) and providing exposure to secular themes," Arya said.
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Arya is increasingly bearish on smartphone vendors such as Skyworks and Qorvo. He also said Texas Instrument is facing capex pressures and Teradyne is dealing with uncertain demand from Apple, Inc. (NASDAQ:AAPL) and weakness in the China Android market.
His top Buy-rated stock picks include NVIDIA Corporation (NASDAQ:NVDA), ON Semiconductor Corp (NASDAQ:ON) and KLA Corp (NASDAQ:KLAC).
Benzinga's Take: There has been a lot of noise in the semiconductor space this year, including ongoing shortages and supply chain disruptions, as well as a broad market rotation out of tech growth stocks. This noise and general sector weakness will certainly create some buying opportunities for long-term semi stock investors willing to stomach the near-term volatility.
