FBR Capital’s Craig Berger this morning offers a generally positive view on multiple semiconductor names, writing that his checks of the electronics supply chain suggest, we remain constructive on the group for post-Labor Day goodness as business remains generally robust, inventories are lean, and valuations reasonable (13x 2011 P/E for the sector). ”
In particular, Berger reiterated Outperform ratings on Broadcom (BRCM), Marvell Technology Group (MRVL), and Qualcomm (QCOM), but a Market Perform rating on Advanced Micro Devices (AMD) and Nvidia (NVDA).
Marvell trades at just 9 times projected earnings per share, fully reflecting skepticism around such things as the drop off in cellular application processor sales at Research in Motion (RIMM). The company has increasing possibility of processor design wins at SAMSUNG (SSNLF), and it may get a lift from increased disk drive orders at Western Digital (WDC), its top customer, as the disaster in Japan has thrown off sales at Western’s competitor Toshiba (TOSBF).
Broadcom’s shares have been “in a nasty tailspin” of late, because of worries about “choppiness” in its wireless chip business with Samsung, and LG Electronics (LGERF), and possibly at Apple (AAPL). Several cellular vendors built units ahead of demand in Q1, he writes, which mah be causing some fall-off in orders. However, this is just a “bump in the road, he thinks.
As for Qualcomm, it is being hit by the same fears of “choppiness” in cell phones, but the company’s products are “well-positioned,” and expects smartphone “mania” to build in the latter part of this year. Meantime, the company’s baseband win in the iPhone 5, which he expects Apple to produce in a volume of 8 million units in Q3, could be a catalyst for the stock.
As for AMD and Nvidia, the former must make clear its ability to supply its 32-nanometer chips and must be able to turn recent design wins into clear revenue payoff, while Nvidia must recover from the sense that non-iPad tablets are showing weak sales, and that Nvidia may lose some graphics chipset sales in Apple’s notebooks.
Article courtesy of Tech Trader Daily