Broadcom, Helped by Apple, Outperforms Its Rivals


NEW YORK (TheStreet) -- The economic malaise that has gripped Silicon Valley looks set to devour semiconductor stocks. Broadcom (BRCM) may be an exception.

In a note released on Tuesday, RBC Capital Markets downgraded the semiconductor sector to "market weight" from "overweight." The factors include uncertainty about the economy, lack of improvement in PC orders (which make up 40% of semiconductor revenue), weak growth in communications equipment, and softness in both China and Europe.

"Order rates are beginning to decelerate across multiple end-markets as macro concerns continue to weigh on the overall mood, while a lack of inventory investment could pose near-term revenue risks," RBC Capital's Doug Freedman said in the note.

RBC lowered its semiconductor sales outlook for 2012 and 2013, to $297.2 billion and $312.2 billion, respectively, from $301.2 billion and $314.5 billion.

Set against this backdrop, RBC downgraded Intel (INTC) , Texas Instruments (TXN) , Analog Devices (ADI) and Nvidia (NVDA) to "sector perform" from "outperform," pointing to "visible headwinds" in the next three to six months.

The firm, however, upgraded Broadcom (BRCM) to "outperform" from "sector perform." "It is prudent to rotate into wireless-communications names exposed to winning platforms (Broadcom, Peregrine Semiconductor (PSMI) , SanDisk (SNDK) ), while reducing exposure to the PC ecosystem (Intel, Nvidia, Marvell (MRVL) ) given our reduced demand forecast," Freedman said.

Touted as a potential component supplier to Apple's (AAPL) new iPhone 5, Broadcom is well-positioned to capture growth in the mobile market.

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