Oppenheimer & Co. articulated a thesis Friday that many analysts have considered for weeks -- that recent weakness in semiconductor shares represents a buying opportunity in the aggressively traded sector.
The brokerage upgraded four big names to buy from neutral:
"With the semiconductor pulling back on average approximately 15% over the past two months, we find valuations levels in the industry more reasonable," Oppenheimer wrote. "As we believe semiconductor fundamentals remain intact, we are turning more aggressive on the semiconductor stocks."
The logic has informed much Wall Street research on Intel of late, both before and after the company guided the midpoint of its revenue forecast in line with estimates last week. The stock, which had been trading around $34 in late January before falling to the high $20s, has been typical of the group as a whole.
"In general, we believe order rates are strong, visibility is good and pricing is stable to increasing" in the sector, Oppenheimer said. "We believe the strong fundamentals will allow semiconductor companies to post results at the high end of, if not slightly above, March quarter guidance.
"Additionally, we expect the above factors to contribute to strong June quarter outlooks," the brokerage said. "Consequently, we believe 2004 estimates will likely be revised higher for many industry participants during the March quarter earnings season."
In early trading Friday, Intel was up 38 cents, or 1.4%, to $27.46; Broadcom was up 87 cents, or 2.3%, to $38.95; Fairchild was up 46 cents, or 2%, to $22.96; and Micron was up 52 cents, or 3.6%, to $14.95. Oppenheimer doesn't make markets in any of the stocks.