Analysts Like Novellus' Soothing Words - TheStreet

Novellus Systems


bucked a trend last night and told Wall Street it was still comfortable with second-quarter estimates. Although the maker of semiconductor production equipment didn't rule out the chance that it could guide lower before it releases earnings in July, several analysts expressed good cheer at the news, including

Merrill Lynch

. It upgraded the company's rating to accumulate from neutral.

In a research note called "The Good, The Bad and The Uncertain," analyst Brett Hodess broke down the news from chip equipment maker Novellus, telling investors that visibility for the second half has decreased and plans for at least one 300 millimeter wafer factory -- a potential revenue stream for Novellus' 300 mm semiconductor production equipment unit -- had been pushed back until 2002. That covers the bad and uncertain.

But what about the good?

Hodess thinks Novellus has a clear advantage over rivals because of new technologies and the likelihood that, by year end, orders will have stabilized and be ready to bounce back in 2002. "We believe the current valuation implies a greater than 3-to-1 reward to risk profile," he said, basing this statement on yesterday's close of $47.90.

Novellus popped 5.7% to $50.62 today.

Merrill wasn't alone with nice comments.

Thomas Wiesel Partners

reiterated its buy rating on the stock and

S.G. Cowen

told investors the downside was limited. But overall, many brokerages, including

Salomon Smith Barney


UBS Warburg

, reiterated the same cautious tone that Novellus used last night. Things seem okay right now, these brokerage houses said, but with half of the quarter yet to be seen, nothing is certain.