A number of chip-equipment producers were downgraded to neutral from buy at DA Davidson, with the firm citing factors including significant year-to-date stock-price advances.
Besides the price rises, analyst Thomas Diffely wrote in a Monday research note that "the all-important memory recovery continues to lag expectations and the near-term data flow will likely remain negative."
But even with the current downgrades, the analyst said, "our multiyear view remains bullish as the emerging data-driven economy should eventually drive a significant memory buildout."
Diffely downgraded the following stocks to neutral from buy:
The analyst maintained buy ratings on Nanometrics (NANO) - Get Nanometrics Incorporated Report and Rudolph Technologies (RTEC) - Get Rudolph Technologies, Inc. Report -- because of what he called their strong second-half outlooks -- and MKS Instruments (MKSI) - Get MKS Instruments, Inc. Report because it has seen less-sharp price appreciation and because the company has diversified its operations.
But he cut the price targets, to $42 from $44 on Nanometrics, to $32 from $34 on Rudolph and to $95 from $105 on MKS.
Nanometrics was off 1.3% at $33.35, Rudolph gave up 2.6% to $26.76, and MKS eased 1.3% to $77.02.
Diffely kept his buy rating on Cohu (COHU) - Get Cohu, Inc. Report because he's seeing faster cost synergies from last October's Xcerra acquisition. He cut the price target to $19 from $25. The stock was off 1.5% at $15.06.
And he maintained two design firms, FormFactor (FORM) - Get FormFactor, Inc. Report and Photronics (PLAB) - Get Photronics, Inc. Report at buy "as overall design activity remains robust." He pared the price targets, to $19 from $23 on Form Factor and to $13 from $15 on Photronics. FormFactor shares slipped 1% to $15.63, and Photronics was at $8.36, down 1.5%.
The expected recovery for memory "has been pushed into 2020," Diffely said. Supply continues to outpace demand and "pricing is still falling, albeit at a slower clip," he wrote.
And if the market is to stabilize in the second half, it would need to see a recovery in handsets and growth in data centers, the analyst said.
He also said that "geopolitical turmoil in China (especially with regards to marquee names Huawei and ZTE (ZTCOY) ) has created uncertainty and is dampening demand from this important semiconductor customer base."