Semiconductor stocks like Broadcom (AVGO) - Get Free Report, Skyworks Solutions (SWKS) - Get Free Report, NXP Semiconductors (NXPI) - Get Free Report and Qualcomm (QCOM) - Get Free Report were rising Friday following a bullish note on the sector from analysts at Goldman Sachs.
Goldman upgraded Broadcom to buy on expectations that the semiconductor sector will report solid third-quarter results and provide a positive outlook on the sustainability of robust fundamentals into 2022.
"We recommend investors to stay selective within the group and to buy/own names — such as AMD, ADI and ON — that have idiosyncratic EPS drivers that can offset, albeit partially, any signs of cyclical weakness," analyst Toshiya Hari said.
Broadcom has outsized exposure to cloud/enterprise/telecom spending, has formidable pricing power and has shown strong free cash flow generation, according to Goldman.
Shares of Broadcom were rising 1.4% to $504.37 per share Friday morning. Analog Devices (ADI) - Get Free Report shares were rising 1.4% to $170.51, ON Semiconductor (ON) - Get Free Report shares were rising 0.84% to $43.37 per share.
"Since being added to the Americas Buy List on 03/04/21, WDC is down 11% versus the S&P 500 up 18%. We acknowledge that our upgrade in early March was the wrong call — as weakness in PCs and concerns regarding the outlook for NAND ASPs have driven underperformance in the stock — and now await a better entry point from the sidelines," Hari said.