Analyst Actions: Gateway, Comcast, AnnTaylor, Abercrombie & Fitch
The semiconductor industry is in sorry shape. That's what analysts are saying this morning after some new data from the
Semiconductor Industry Association
that shows chip sales are falling.
Sales were down 6% in the Americas from the third quarter to the fourth quarter, and have dropped 3% worldwide. Normally, sales increase 5% quarter-over-quarter. They still show positive year-over-year growth, just at a much slower rate than during the summer.
Credit Suisse First Boston
said inventory levels have worsened in recent months (that is, stockpiles have grown at a time when demand is shrinking) and could likely take until the end of the second quarter to burn off.
Lehman Brothers
, in a comment, wrote that "semiconductor revenue growth will decline into negative comparisons by mid-2001."
How does the latest industry data compare? CSFB says these quarter-over-quarter sales are the poorest results seen since 1997 and 1986. Plus, "normal first-quarter seasonal weakness is being aggravated by economic slowdowns in demand; visibility is as impaired as we've seen it since the Eighties."
CSFB wrote that stock valuations of chip companies are too high -- and another wave of downward revisions could occur in the next two months.
Chip sales have been sagging along with weaker consumer and corporate demand for new computers and equipment that use semiconductors to power them. When demand slows, companies find themselves with excess capacity, forcing them to cut back production in order to eliminate their existing inventories. The ripple effect is partially responsible for the current slowing throughout the economy. Companies like computermaker
Gateway
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and chip giant
Intel
(INTC)
TheStreet Recommends
, for example, have seen their sales slow and their stocks drop.
The industry association, in its release, forecasts 22% year-over-year growth, although it admits that inventory accumulation makes the forecast unlikely to be reached.
Credit Suisse First Boston upgraded the media, cable and interactive TV sector to a neutral from an overweight stance and upgraded three companies in the process.
Comcast
(CMCSA)
was upgraded to strong buy from hold;
Cox
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was upgraded to strong buy from hold; and
Charter
(CHTR)
was upgraded to strong buy from buy.
Upgrades
AnnTaylor
(ANN)
: UP to outperform from neutral at
Morgan Stanley Dean Witter
.
Prudential Securities
reduced fourth-quarter estimates to 33 cents a share from 38 cents a share.
Active Power
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: UP to buy from accumulate at
Merrill Lynch
.
Dillard's
(DDS)
: UP to buy from neutral at
Salomon Smith Barney
.
Ultramar Diamond Shamrock
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: UP to strong buy from buy at
UBS Warburg
.
Downgrades
Abercrombie & Fitch
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: fiscal 2001 EPS DOWN to $2.80 from $2.85 at Prudential Securities.
APW
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: fiscal 2001 earnings per share DOWN to $2.00 from $2.40 at CSFB; price target: $65 from $80.
Kilroy Realty
(KRC)
: DOWN to buy from strong buy at
Deutsche Banc Alex. Brown
.
Storage USA
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: DOWN to neutral from outperform at Morgan Stanley.
Initiations
Gtech Holdings
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: NEW buy at Morgan Stanley.
