By Senad Karaahmetovic
A Barclays analyst has downgraded three semiconductor stocks as he issued a warning that recent gains in the sector look overdone.
The analyst slashed Lam Research (NASDAQ:LRCX), Camtek (NASDAQ:CAMT), and Ouster (NYSE:OUST) to Equal Weight from Overweight.
He told clients that the bank is not buying the recent semis bounce as he believes the semi sector is “still in for a substantial reset (more Tech Bubble than Financial Crisis”.
A “large cut to earnings” is likely coming over the next 12-18 months, warns the analyst, as he calls for a 30-40% earnings cut. Semi Cap and Memory cuts are likely to come in closer to 50% with even such drastic developments may not be enough for a complete reset.
“The point here is that this downturn is not relegated to just the low-end Consumer markets, and we see the weakness in those markets today as a precursor to corrections in markets such as Industrial, Auto, and the Data Center. We don’t like much of anything in the group and think the recent bounce only sets a higher bar for the correction coming,” he wrote in a client note.
As far as the specific chip stocks are concerned, the analyst sees Nvidia (NASDAQ:NVDA), Intel (NASDAQ:INTC), and Qorvo (NASDAQ:QRVO) missing guidance targets given their high exposure to consumers.
“We had thought that improving supply may help the names that missed over the last two quarters on supply (i.e. semi cap, optical) but ASM/ASML/STX already set the tone for the continued narrative of China shutdowns, COVID impacts, and challenged supply,” the analyst added.