It’s been a terrible year for chip equipment stocks, but extremes turn the tide, with prices in the chip industry falling enough to provide an attractive buying point, according to New Street Research.
Analyst Pierre Ferragu on Friday (21st) upgraded Applied Materials (AMAT-US) and ASML (ASML-US) stock ratings from “neutral” to “outperform”, saying that the two semiconductor manufacturing equipment The plant is near the bottom.
He has a $115 price target on Applied Materials, while ASML has a target price of 770 euros (about $758 at Friday’s exchange rate). “We are at a point where we can confidently recommend a buy into the property,” he wrote.
Applied Materials rose $3.76, or 4.78%, to close at $82.42 per share on Friday; ASML’s American Depositary Receipt (ADR) rose $24.96, or 5.71%, to close at $462.23 per share. Both stocks are down more than 40% so far this year.
The analyst noted that Lam Research (LCRX-US) earlier this week estimated that industry-wide revenue for wafer fabrication equipment could fall by more than 20% next year, dampening Wall Street expectations. He expects the companies could cut their financial forecasts again, but their shares could bounce back before an eventual downward revision.
“From this point of view, it would not be surprising to see an improvement in the price-to-earnings ratio, and we expect to have reached the bottom of earnings by the end of 2023.”
Ferragu is optimistic that some long-term favorable factors for semiconductors, such as 5G, artificial intelligence (AI) and high-performance computing (HPC), will eventually bring another wave of growth to the industry.