What To Expect From Semiconductor Earnings This Week
The market is readying itself for a slew of semiconductor earnings this week that comes amid secular declines in PC and tablet markets along with a saturating global smartphone unit growth.
“[W]e continue to focus on pockets of solid semiconductor growth in market subsectors including: 1) datacenter, 2) gaming and video processing including AR/VR, 3) automotive, and 4) IoT and embedded markets,” Canaccord Genuity analyst Matthew Ramsay wrote in a note.
Ramsay’s checks point to a solid channel and operating outlook for most of the companies in his coverage universe. The analyst expects modest low- to mid-single-digit overall semiconductor growth.
Following is a brief overview of various chip companies set to report next week, along with their respective earnings dates:
Advanced Micro Devices, Inc. (NASDAQ: AMD) – Buy, $13 price target (PT), January 31:
Ramsay is optimistic on AMD in 2017 on the back of very strong new product roadmap. The analyst calls the fourth quarter “transitional” for the company and “should be seasonally down sharply in the gaming console business and Compute & Graphics sales will not yet see benefits from the Ryzen CPU launch.”
As such, investors will focus on the first quarter guide for Ryzen desktop CPUs and commentary on the upcoming Zen server and Vega GPU launches.
Cavium Inc (NASDAQ: CAVM) – Hold, $60 PT, February 1:
Despite being positive on the smooth integration of the QLogic acquisition, the analyst remains on the sidelines on valuation, push of ThunderX ARM server program until 2018.
That said, Ramsay expects strong synergy capture, rapid QLogic margin progression, positive management commentary regarding Xpliant and LiquidSecurity design wins.
CEVA, Inc. (NASDAQ: CEVA) – Buy, $41 PT, February 1:
CEVA would be an indirect beneficiary of Apple Inc. (NASDAQ: AAPL) - QUALCOMM, Inc. (NASDAQ: QCOM) legal spat as its digital signal processors are fitted in to the Intel Corporation (NASDAQ: INTC) chips, which would gain more traction at Apple following its dispute with Qualcomm.
“Given strong contributions from Intel iPhone 7S modems expected to hit CEVA royalties during Q1/17 (a quarter in arrears from Q4/16 shipments), we anticipate guidance above consensus with strong LTE unit growth again in 2017,” Ramsay wrote in a note.
Cirrus Logic, Inc. (NASDAQ: CRUS) – Buy, $70 PT, February 1:
Apart from content gains with largest customer Apple, the company is seeing a promising start of share expansion within the Android ecosystem and in digital headsets. For the fourth quarter, the analyst expects solid upside to consensus driven primarily by Apple.
DSP Group, Inc. (NASDAQ: DSPG) – Buy, $14 PT, February 2:
Despite uncertainty around Samsung’s upcoming Galaxy S8 and Note 8 roadmaps, Ramsay believes DSP Group’s progress in VoIP and ULE products is gaining stride.
“While we believe Samsung sales will contribute only 10% of revenue during 2017, we recommend nimble investors buy shares post management’s commentary on the Samsung revenue outlook for 2017,” Ramsay continued.
NXP Semiconductors NV (NASDAQ: NXPI) – Hold, $110 PT, February 1:
Even as the Qualcomm acquisition is underway and expected headwinds in the EMV credit card business, the analyst believes NXP is well positioned for strong 2017 growth in automotive, MCU/IoT and USB-C interface products. Ramsay noted that the company remains on track to hit low-30 percent operating margins exiting the year.
Silicon Laboratories (NASDAQ: SLAB) – Buy, $71 PT, February 1:
“Heading into earnings, we anticipate IoT business growth momentum toward 20% CAGR will remain intact for this diverse business and we anticipate upside to Q1/17 consensus with strong guidance driven by incremental module sales momentum in the IoT business,” Ramsay added.
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