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Analysts gain lots of attention when they set target prices that are well-beyond a company’s closing price. Bloomberg published a list of companies with the highest gap between the average target and the trading price.
Investors should not expect consensus calls to be correct, but companies below their target prices are a good way to look for trading opportunities. Still, analysts could downgrade a company to be in line with more reasonable expectations.
Business Section: Investing Ideas
In recent weeks, weak earnings from
Intel (INTC), Microsoft (MSFT), Google (GOOG), and
AMD (AMD) confirm the PC sector is at a cyclical trough. Investors who bid up shares for these companies will have to look for the economy to improve.
Windows 8, touted as the system to boost PC sales, will take time to play out. Intel said that there are over 100 tablet-PC designs that will reach the market in the months ahead.
The surprise decline in PC bell-weathers also hurt shares for many other technology
Despite Micron forecast to provide 64.6% upside, semiconductor chip companies have the highest risk as sentiment shifts down. The companies with the most downside are
NVIDIA (NVDA),Micron (MU), and
AMD (AMD). AMD is trading at 30% below its target price. These companies have costs associated with plant utilization. Intel is already reducing its supply for chip production in the weeks ahead, in anticipation of reduced demand. Hard-drive maker
Western Digital (WDC), who benefited from a shortage in early-2012, will also be face lower demand as PC-sales drop this quarter.
LSI Corporation (LSI), JDS Uniphase (JDSU), virtualization software maker
Citrix Systems (CTXS), and
Agilent Technologies (A) rely on corporate demand. These customers are cautious on their spending, but the demand is not declining as fast as on the consumer side.
Written by Kapitall’s Chris Lau.Disclosure: Author may acquire shares in NVIDIA within 72 hours of this publication.
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