In a note to clients Wednesday, Redburn Atlantic started Applied Materials (NASDAQ:AMAT), ASM International (AS:ASMI) (ASMIY (OTC:ASMIY)), and Lam Research (NASDAQ:LRCX) at Buy, KLA Corporation (KLAC) at Neutral, and ASML Holdings (AS:ASML) at Sell.
Analysts at the firm, covering the semiconductor sector in the note, said they turn positive on the semiconductor sector ahead of the last
consensus earnings cuts expected in 1Q 2024.
AMAT's price target was set at $149, ASML €629, ASMI €465, LRCX $700 and KLAC $545 per share.
"Cyclically, most chipmakers will see improvement before wafer fabrication equipment (WFE) does. Recent data points in DRAM coincide with the first green shoots in several end markets," the analysts wrote.
"It feels uncomfortable to upgrade the semiconductor sector with 30% excess capacity exiting 2023. However, in a sector notoriously anticipatory, we upgrade ahead of the cyclical trough, and ahead of the cuts to consensus FY24-25 earnings estimates that we expect to occur with FY23 results/FY24 guidance during 1Q24," they added.
The firm also stated that it recommends the "picks and shovel sellers in an AI gold rush" and that semiconductors represent that. The "attractive risk-reward opportunity supports our conclusion that investors will be quick to look through a challenging 2024 and focus instead on the growth opportunities in 2025 and beyond," they concluded.