The earnings season is expected to be brutal for the microchip sector as waning demand for chips in the third quarter discourages investors. Chipmakers fell under even greater scrutiny on Tuesday after Microchip Technologies (MHCP) reduced its first quarter earnings forecast. Microchip pinned unfavorable global economic conditions, ranging from high unemployment to bloated oil prices and weak consumer confidence for the earnings adjustment, causing investors to worry other semiconductors would fall victim to the same set of circumstances. The fear of contagion led semi-conductor stocks broadly lower on Tuesday as investors attempted to exit prior to beginning of earnings. Some stocks were edging back up in Wednesday trading, but they were few and far between.
The mixed messaged bed the question whether exiting the semi-conductor market now is the right idea, or if there are some exceptions to the trend. Below are three stocks that appear to be in line with their earnings and could continue to thrive following their reports.
Unlike many of its peers, Intel has the benefit of offering more than just chips. This past earnings season, the company has seen robust orders for servers which could help them meet their goals in spite of any weakness in other areas of their business. Analysts across the boars agreeing with Equities research analysts at MKM Partners initiating coverage on shares of Intel with a"buy" rating and a $25.00 price target on the stock. Evercore Partners also initiated coverage on shares of Intel in a research note to investors in late June with an "equal weight" rating and a price target of $24.00. The company closed around $22 in trading yesterday.
Advanced Micro Devices (AMDX)
The fate of Advanced Micro Devices remains in question and while it appears as though they will offer results in line with estimates the bulls and bears have been having a tug-of-war with this stock. On Monday, JMP downgraded the stock only to have Longbow Research offer a defense in favor of shares going higher after earnings. AMD's Fusion chips are experiencing strength both in terms of sales and reviews and while Intel’s more advanced processors are considered the high-end of the spectrums AMDs market audience is located elsewhere, in the group of people who do not want to shell out for a high end lap top. As joblessness and overall economic weakness continues that market is not going anywhere, meaning AMDX could continue to hold its own.
Maxim Integrated Products (MXIM)
Maxim is among the companies expected to exhibit the highest revenue growth. In spite of some weakness in the smartphone arena, Maxim’s exposure to Apple (AAPL), whose iPhone is the most popular of its kind on the market right now, could help bolster shares. That said Maxim could still deliver results slightly beneath seasonal norms as demand across the sector is weak and their Apple exposure only makes up part of their business. Terence Whalen of Citigroup approved of Maxim in spite of slapping a neutral rating on the remained of the semi-conductor industry and highlighting weakness among analog chip makers. After a week of weakness, it appears as though the company’s earnings, should they come up slightly short have already factor into the current share price.
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