Chip Stocks Taken Down by UBS - Here's Why

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Talk about throwing your chips down on the table.

UBS analyst Timothy Arcuri downgraded a trio of chipmakers on Thursday - Applied Materials (AMAT) - Get Report , Lam Research (LRCX) - Get Report and KLA Corp. (KLAC) - Get Report - downgrading all three to a sell and lowering two of their one-year price targets on what he sees as a near-term spending pullback on wafer fab equipment that will impact the entire group.

In a research note to clients, Arcuri downgraded Applied Materials and Lam Research to sell from neutral, and KLA to sell from a buy amid what he sees as headwinds picking up in the first half of next year on hardware makers cutting back their spending on wafer fab equipment.

He cut his expected 12-month price target for Applied Materials down a buck to $48 from $49 and his price target on KLA to a Wall Street low of $140 from $192.

It was roughly the same idea for Lam Research, though Arcuri held onto his $240 price target as he expects less downside in revenue.

To be sure, Arcuri's expectations stand in contrast to Citi analyst Atif Malik, who earlier this month reiterated his buy rating on Lam Research and raised his one-year price target to a Wall Street high of $330 from $282.

On Lam Research specifically, Jim Cramer and the Action Alerts PLUS team agree with Malik, noting after the company's latest earnings that they see more good news to come in 2020.

"This is still very much a strong 2020-outer year earnings-driven story as the cycle moves back into their favor," Cramer and team wrote. "We plan to update our price target accordingly in the coming days to a level that is well above our current $230 price."

Lam Research is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells LRCX? Learn more now.

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