Lam Research Corp. (LRCX - Get Report) lead semiconductor stocks lower Wednesday after analysts at Evercore ISI cut their target price on the stock and warned that a global recovery in chip memory demand could be delayed until late next year.
Evercore analyst C.J. Muse lowered his target on Lam Research by $30 to $195 per share, and reduced his rating to 'in line' from 'outperform', even as it described the group as a "high quality company with superior earnings power through cycles". Evercore cited excess DRAM and NAND inventories, as well as expected cuts in capital spending from major chipmakers, as driving the delayed sector rebound.
"Amidst ever worsening pricing across both DRAM and NAND and industry participants moving closer and closer to cash costs, we now are hearing about delays not only in capacity adds but also technology buys," Evercore wrote. "Here we highlight memory pushouts from longest lead time litho equipment in the last 2 weeks - including both immersion (we believe Samsung and Micron) and KrF (which is most tied to 3D NAND). In turn, we now see a likely air pocket for memory equipment demand into Lam's December Q timeframe and 1HCY20."
Lam Research shares were marked 4.7% lower by mid-morning trading in New York Wednesday to change hands at $181.02 each. The move pulled most of its semiconductor peers deeply into the red, as well, with four major chipmakers all leading decliners on the S&P 500.
Applied Materials (AMAT - Get Report) fell 5.07% to $41.53, while Micron Technology (MU - Get Report) slumped 4.7% to $33.20. Western Digital (WDC - Get Report) shares were seen 4.3% lower at $36.76 each. The Philadelphia Semiconductor Index, the sector benchmark, was marked 2.12% lower at 1,388.37 points, matching its biggest single-day pullback since May 22.
Texas Instruments said historical downturns in the semiconductor sector last between four and five quarters, a figure that would put the expected rebound in global demand into the early part of 2020.