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New research from UBS and SoundView threw cold water on the rallying semiconductor space this week, laying out generally negative opinions on where both stocks and fundamentals are headed.

Coupled with an uninspiring update from

Texas Instruments

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, the comments made for a rough Wednesday for investors. The Philadelphia Semiconductor Index, up 48% since January, was off close to 4% in early trading.

While UBS Securities was bullish about sector fundamentals and raised its price targets on several big names, investors should note that the new targets are in most cases


than where the stocks are currently trading.

Of the seven semiconductor companies UBS reviewed, five of the new price targets would represent a decline from current levels. In some cases the expected declines are substantial.

Of the two stocks that UBS expects to show gains, only

International Rectifier


is substantial.

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Texas Instruments

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is already roughly in line with what the brokerage believes is fair market value. All of their estimates are based on price-to-earnings and price-to-sales estimates for the December 2004 to September 2005 period.

In its report, UBS cited "new design wins" with the new


(INTC) - Get Intel Corporation Report

Centrino-based notebooks as driving International Rectifier's fundamentals, rather than any sector trend.

Both UBS and SoundView expect double-digit year-over-year sales growth from


(MU) - Get Micron Technology, Inc. Report

, but SoundView said "stable DRAM pricing is not good enough for Micron to outperform" and lowered its rating to neutral and its price target from $21 to $16. UBS did not provide a new price target for Micron but currently rates it neutral. Micron closed at $14.70 on Monday, 9% under SoundView's new target. The shares fell another 91 cents, or 6%, to $13.79 Wednesday morning.

The analysts disagree on the direction of DRAM pricing, one of the major drivers that determine sector earnings. While UBS thinks that DRAM pricing is "steadily improving," SoundView says that during a recent tour of Asia, it "found DRAM prices as quite mixed" and that "the risk of ... price weakness is a real scenario in the coming 4-8 weeks."

While cautioning that growth rates are uncertain, UBS is predicting a 17% increase for the sector in 2004, notwithstanding their predictions of substantial price declines in several sector stocks.