Geopolitical uncertainties and industry-specific headwinds are likely to hurt analog and mixed-signal semiconductor markets, prompting Stifel to revisit its ratings on four names in the sector.
Stifel analyst Tore Svanberg made the following rating and price target changes:
MACOM Technology Solutions Holdings Inc (NASDAQ: MTSI): downgraded from Hold to Sell, price target revised from $22 to $20.
Maxim Integrated Products Inc. (NASDAQ: MXIM): downgraded from Buy to Hold, price target lowered from $75 to $65.
NXP Semiconductors NV (NASDAQ: NXPI): downgraded from Hold to Sell, price target reduced from $99 to $84.
Power Integrations Inc (NASDAQ: POWI): downgraded from Buy to Hold, price target trimmed from $85 to $75.
Several data points over the past three to six months suggest a peaking of the AMS markets, Svanberg said in a Wednesday note. (See the analyst's track record here.)
Buying ahead of tariffs over the past few months has reduced visibility into the end demand picture, the analyst said.
Following eight consecutive quarters of above-trend growth rates, the AMS markets recently entered a period of below-seasonal growth, Svanberg said, citing Stifel's trend-line analysis. May, June and July saw sub-seasonal month-over-month growth rates, with the September quarter poised to see flat quarter-over-quarter growth, he said.
Heavily indebted companies are at risk from rising interest rates, according to Stifel.
Debt-Heavy MACOM Tech Now a Sell
MACOM Tech, with a debt-equity ratio of about 98 percent at the end of the June quarter, is likely to be constrained by its greater debt exposure and a lack of secular catalysts, Svanberg said.
The analyst said consistent execution remains a challenge for the company, citing its depressed EBIT, high interest expense and elevated intermediate-term capex requirements.
Maxim Not Immune To Broader Sector Slowdown
Maxim is well-positioned to benefit from secular trends, but it may not be immune to the broader slowdown in the overall AMS industry, Svanberg said. The company's broad-based revenues are likely to be impacted to some degree by the cyclical slowdown in the overall analog market, he said.
The company's consistently solid execution is already reflected in the stock, the analyst said.
Debt, Slowing Business Momentum Are Headwinds For NXP
NXP's estimated pro forma debt-equity ratio exiting calendar 2018 of 60 percent — and net debt of $4.95 billion — increases its risk profile, Svanberg said. This is despite the prospects of the company buying back shares massively, which will likely artificially boost EPS and FCF/share, the analyst said.
"Moreover, recapturing business momentum remains amidst a potentially peaking semiconductor market."
Industrywide Malaise To Hit Power Integrations
Power remains well-positioned to take advantage of key secular trends, Svanberg said. Yet these secular trends are likely to be overshadowed by the broader slowdown in the overall electronics industry, making the company more vulnerable to a cyclical slowdown, he said.
The Price Action
Macom shares were plunging 13 percent at the time of publication Wednesday, while Maxim was down 5.83 percent, NXP was down 5.28 percent and Power Integrations was down more than 10 percent.
Related Link: Susquehanna: AMD Production Shift To Taiwan Semiconductor Highlights Manufacturer's 'Domination'
Latest Ratings for MTSI
|Sep 2018||Stifel Nicolaus||Downgrades||Hold||Sell|
|Aug 2018||JP Morgan||Downgrades||Neutral||Underweight|
|Aug 2018||Bank of America||Maintains||Underperform||Underperform|
View More Analyst Ratings for MTSI
View the Latest Analyst Ratings
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