2 chip equipment stocks to buy on a discount, according to one analyst
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It’s been a bad year for chip equipment stocks. But based on history, prices in the sector have fallen enough to present an attractive buying opportunity, according to New Street Research.
On Friday, analyst Pierre Ferragu raised his rating for
Application materials
(code: AMAT) stocks and
ASML
(
ASML
) stock outperformed Neutral, indicating a bottom is near for semiconductor manufacturing equipment makers. He has set a target price of $115 for
Application materials
and €770, or about $758 as of Friday morning, for ASML.
“We are at a point where we feel confident recommending to buy the sector,” he wrote.
In early trading Friday, shares of Applied Materials were up 2.7% to $80.81, while the ADR for ASML was up 2.8% to $449.35. Both stocks are down more than 40% this year.
The analyst cited how
Lam Nghien
(LCRX) led Wall Street to scale back expectations earlier this week, predicting that industry-wide revenue from wafer-making equipment could fall more than 20% next year. He expects companies may lower their financial forecasts again, but said stocks could rise ahead of the final cut.
“We wouldn’t be surprised to see [valuation] He wrote. “We expect an earnings bottom to materialize by the end of 2023.”
Ferragu is optimistic that factors that benefit the semiconductor industry in the long term, including 5G, artificial intelligence and high-performance computing, will eventually bring another wave of growth to the industry.
Write to Tae Kim at [email protected]