Conditions Are Ripe For Semiconductor Stocks To Rebound, Analysts Say At Informed Investors Forum
SANTA CLARA, Calif.--(BUSINESS WIRE)--July 27, 1998-- Semiconductor stocks are at lows or very close to them and will likely rebound over the rest of the year and into 1999, three prominent industry experts told attendees at the 3rd Annual Informed Investors Semiconductor Stocks Forum Saturday July 25 in Santa Clara.
Those sentiments were affirmed by executives of two Silicon Valley chip companies presenting at the Forum, 8x8, Inc. (Nasdaq:EGHT - news) and VLSI Technology (Nasdaq:VLSI - news) each of whom suggested order activity is returning to normalcy after significant slides in the first half of the year. Audio tapes of the entire Forum are available for $48.95 from Informed Investors, 800/992-4683. Transcripts of the three keynote speakers, by hard copy or email, are available for $25 for the set, or $15 for any individual speech.
Charles Boucher, senior semiconductor analyst at Donaldson Lufkin Jenrette (http://www.dlj.com), said substantial evidence suggests the semiconductor chip industry is at or near bottom of both its long-term business and inventory correction cycles. Capital expenditures in the businesses were way down in 1998 and should rebound in 1999. Moreover, semiconductor stocks, he said, are currently at a steep discount both relative to their own price history and the rest of the market as measured by the S&P 500.
``Semis are down about 25% relative the S&P and 46% off their 52-week highs,'' Boucher said. ``This is the closest to full capitulation by Wall Street I've ever seen. With record low valuations of these stocks and a bottoming of the long-term cycles ... this is a good entry point to get into these stocks.
``Shipment rates in terms of units and revenue are in fact bottoming in July and we expect to see that accelerate the remainder of the year. What's most important to Wall Street is what direction this curve is,'' Boucher added. ``If we are correct in our hypothesis, that we are at the bottom and there is an acceleration in the business, then it's going to drive a rally in the stocks that is going to happen in the very near term.''