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Barclays analysts downgraded four semiconductor stocks today as they still see material cuts through earnings in the PC, Handset, and Memory parts of the sector.
The analysts downgraded Analog Devices (NASDAQ:ADI), NXP Semiconductors (NASDAQ:NXPI), and Qorvo (NASDAQ:QRVO) to Equal Weight from Overweight. Moreover, the analysts cut Silicon Laboratories (NASDAQ:SLAB) to Underweight from Equal Weight.
“We expect material cuts through earnings in RF/Memory/PC and would look for these cuts to get more positive. Analog on the other hand, has not even begun the process and this is why we are stepping away now in favor of better names off the bottom,” the analysts said in a client note.
The analysts add that they made rating changes as “we would rather be early than late with this rotation.”
“We do feel the PC market is finally near the bottom, but want to see more from the DC side, particularly AMD where we are still well below the street. Semi Cap still needs more de-risking given the rally post LRCX earnings. We see WFE at or below $69B in 2023 but more importantly, see 2024 down further, leaving really no reason to own these names here,” they added.
On the other hand, Texas Instruments (NASDAQ:TXN) is raised to Equal Weight from Underweight as they believe the company will likely be a primary beneficiary of the Chips Act. Moreover, TXN should experience “a more muted 2022” as supply constraints will translate into a smaller EPS correction.
“Valuation also looks better relative to the rest of the analog names,” the analysts concluded.
