Bank of America issued a bleak assessment of the market for semiconductor capital equipment Thursday, urging clients to sell the sector's two biggest names on expectations of weakening demand heading into 2005.
The brokerage dropped
to sell from neutral and lowered its price target on both. BofA also lowered
to neutral from buy.
In the case of Applied Materials, BofA set a new price target of $12.59, down about $2, and forecast a sequential revenue decline of 14% in the quarter ending January. The brokerage was particularly skeptical about demand from Asia, saying strong orders from China and Japan aren't likely to be repeated this quarter.
Bank of America's call is the latest entry in the debate about how seriously semiconductor shares are threatened by the existing inventory surplus, a situation that led to lowered earnings guidance this week from
Regarding KLA, BofA forecast two quarters of stalling revenue and declining orders, followed by declining revenue in the middle of next year. BofA sees Lam's revenue growth stalling and noted higher insider selling last month.