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.