Avnet, Inc. (NASDAQ: AVT), a distributor of electronic components and embedded solutions, is likely to be plagued by margin pressure and challenging semiconductor industry cycle, according to an analyst at Goldman Sachs.
Goldman's Mark Delaney downgraded Avnet from Neutral to Sell and reduced his price target from $39 to $34.
There's likely to be incremental risk to the semi cycle due to increased supply chain inventory, exiting Q1, Delaney said in a Wednesday note. The analyst also said component lead times have increased.
The analyst doesn't see a near-term decline in Avnet's growth, thanks to ballooning backlogs, but is worried because investors are increasingly focusing on the fundamentals in 2019.
As such, Goldman said its estimates for Avnet are above consensus expectations for the next few quarters, but is 12 percent below consensus for 2019.
"We also expect structural headwinds to margins from semi supplier consolidation to persist, and these could be compounded by a more challenging semi cycle that could materialize in late CY18/CY19 and more than offset company specific efforts to improve margins," the note said.
The Price Action
Reacting to the downgrade, the stock was down 3.2 percent to $39.11.
'A Good Time To Buy Equipment Stocks': Citi Upgrades Lam Research, Updates Sector Model
Stifel: Alpha And Omega Semiconductor Shares Weighed Down By Operational Risks
Latest Ratings for AVT
|May 2018||Goldman Sachs||Downgrades||Neutral||Sell|
|Apr 2018||Bank of America||Upgrades||Underperform||Neutral|
|Jan 2018||Longbow Research||Upgrades||Neutral||Buy|
View More Analyst Ratings for AVT
View the Latest Analyst Ratings
See more from Benzinga
- Citigroup: C-Corp Conversion Raises 'Absolute Upside' For KKR
- Zoetis To Buy Abaxis In Billion Deal
- Benzinga's Daily Biotech Pulse: Verastem Uprooted On Stock Offering, Titan Pharma Earnings
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.