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  • dcxavier dcxavier Oct 1, 2000 9:10 AM Flag

    SNO_OT

    No doubt most of you have seen this. The point I
    want to make is that historically, semi-equipment
    share prices begin to turn up about six months prior to
    the bottom of the cycle. Wasn't it amazing how stock
    prices peaking in March called the cycle peak in
    September?


    To: Rustam Tahir who wrote (25143)
    From: Rustam
    Tahir Saturday, Sep 30, 2000 9:02 AM ET
    Reply # of
    25149

    Cautious note from Prudential on
    Semi-equip sector:
    1. Although the current business
    fundamentals for the front-end semiconductor
    equipment
    manufacturers remain robust and customers are clamoring
    for
    delivery, recent data points about weakening demand of PCs,
    cellular phones,
    set top boxes can no longer be
    ignored. In addition, macro-shocks caused by
    sky-high
    creasing oil prices and a weaker Euro could precipitate
    further
    demand weakening.
    2. Our thesis has been that the
    front-end equipment manufacturers could
    see
    re-acceleration in their business starting with late December
    quarter or early
    1H01 driven by the capital spending
    of DRAM manufacturers, the first wave of
    300-mm
    manufacturing line orders from semiconductor manufacturers and
    the
    start of copper manufacturing orders. We have been
    anticipating strong capital
    spending by DRAM manufacturers,
    since they have been absent to date. Early
    signs
    still point to the resolve of semiconductor DRAM
    manufacturers to
    continue their capital spending. However,
    if the current demand weakness
    extends to a
    traditionally strong fourth quarter and to the seasonally
    weaker
    first quarter, we believe the risks for the equipment
    order pushout could
    become real.
    3. Although our
    strong buy rated stocks continue to trade at highly
    attractive
    multiples compared to their peers in the technology
    industry, semiconductor
    equipment stocks are likely to
    remain highly volatile in the near term until
    we have
    better clarity on the semiconductor end market demand.
    If this
    scenario for the order pushout
    materializes, we could see further downward
    pressure on
    these stocks. We still believe that capital spending by
    DRAM
    manufacturers, 300-mm spending and copper spending are essential
    and are
    likely to materialize at a latter date if
    demand softening materializes.
    4. Given the
    heightened risks, we would advise investors to remain on
    the
    sidelines, in the near term, until we have greater clarity
    regarding PC and
    DRAM demand.

 

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