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Broadcom Climbs as Goldman Turns Bullish on Semiconductor Sector

Semiconductor stocks are faring better than many expect, according to a bullish Goldman Sachs note published on Friday.
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Semiconductor stocks like Broadcom  (AVGO) - Get Broadcom Inc. Report, Skyworks Solutions  (SWKS) - Get Skyworks Solutions, Inc. Report, NXP Semiconductors  (NXPI) - Get NXP Semiconductors NV Report and Qualcomm  (QCOM) - Get QUALCOMM Incorporated 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. 

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Shares of Broadcom were rising 1.4% to $504.37 per share Friday morning. Analog Devices  (ADI) - Get Analog Devices, Inc. Report shares were rising 1.4% to $170.51, ON Semiconductor  (ON) - Get ON Semiconductor Corporation Report shares were rising 0.84% to $43.37 per share. 

Goldman did downgrade Western Digital  (WDC) - Get Western Digital Corporation Report to neutral from buy. Western Digital shares were falling 2.44% to $55.19 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.