Monday, July 17, 2006

Calls of Note Part 2

- Banc of America says that although they expect Intel (NASDAQ:INTC) to meet its June outlook, they think bias will be to the low end on both sales and margins. More importantly, the firm expects an outlook for a seasonal increase in sales (+8% Q/Q) and also for some improvement to GM to 52% +/- few points. Supporting this view are several recent data points that seem to indicate that the PC supply chain (including motherboard makers and distributors) has witnessed better business trends in June than in the preceding months, in turn suggesting some stabilization following a turbulent 1H06. In addition, they also believe that inventory trends for Intel's parts, both internally and in the channel, are headed in the right direction, which has positive implications for future Intel processor demand as the channel seeks to replenish their processor inventory for the second half.

With fundamentals at an inflection point, and valuation attractive, the firm views Intel's stock as a compelling value at current levels. Reits Buy and $25 tgt.

Notablecalls: Not actionable but good to know category.

- Citigroup commentson on Semi Equipment space saying pullins continue to dramatically outnumber pushouts with memory makers like Hynix offering vendors financial incentives to meet aggressive schedules. Checks suggest pullins from Hynix, Taiwan DRAM JV (orders now CQ4:06), Promos and Toshiba with pushouts beyond TSMC still surprisingly limited. Tool suppliers have trimmed CQ4:06 forecasts to their supply chain in recent weeks, but the lack of broad pushouts means CQ3:06 guidance/results are not likely to -- at least initially -- be the disaster the firm feels is necessary to avoid a multi-quarter cyclical downturn/inventory adjustment similar to C2004.

While most investors are negative, valuation is not yet "washed out" and a lack of pushouts means capacity adds remain an overhang. Investor attendance at the Semicon show was higher than they can remember in recent years, with most analyst meetings -- particularly LRCX -- overflowing with investors. While sentiment appears largely aligned toward the negative, recent short interest data suggests short interest is relatively low compared to the past two years for all stocks but LRCX, where short interest is about average compared to 2-year trend. Firm emerges incrementally more bullish on Buys NVLS and FORM and incrementally more cautious on Sells LRCX and AMKR.

Notablecalls: Not actionable but good to know category.

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