Thursday, March 08, 2007

Calls of Note Part 4

- Morgan Stanley is raising their view on Semiconductor Capital Equipment to Attractive from In-Line and upping most of their ratings and price targets. Unlike the consensus, the firm believe semi cap equipment stocks will soon reflect a bottoming of manufacturing utilizations in 1H07, an inflection in capital equipment orders in 2H07, and robust capital spending growth in 2008. Consequently, they see a combination of earnings growth and multiple expansion driving 20%+ appreciation in the average semi cap stock over the next 12-18 months.

MSCO sees bottom-up 10-15% capex growth in 2008, flat to down 5% capex in 2007 (vs. +2% previously). They assume non-strategic NAND suppliers will cut capacity expansion plans this year. However, bottom-up 2008 capex analysis indicates spending should pick up, driven primarily by the foundries/NAND flash suppliers and increasing capital intensity as the industry commences the move to 45nm. DRAM concerns in 2007 are overblown. DRAM capex $ per incremental unit shipment in 2007 remains below historical peaks, and DRAM capital intensity remains reasonable relative to historical trends.

Winners will have leverage to 45nm and company-specific product/profitability initiatives: They are upgrading ratings on Applied Materials (AMAT) and KLA-Tencor (KLAC) to Overweight, maintaining Overweight-V ratings on LAM (LRCX) and FormFactor (FORM), downgrading Cymer (CYMI) to Underweight and maintaining Novellus (NVLS) at Underweight.

Notablecalls: Not actionable but good to know category. Some of this stuff may be good for a short-term fade.

1 comment:

Mark said...

Just heard a "rumor" regarding MS negotiating a deal with NEW that will allow NEW to be back to business as usual "fairly soon". Just checking if you have heard anything similar because my rumor "hearings" have not turned out overly valid in the past. lol