Oppenheimer & Co.’s semiconductor analyst Rick Schafer today writes that the industry has one more round of estimate cuts to get through, following a wave of pre-announcements about Q3 in September. It’s possible, he thinks, that “not-as-bad-as-feared Q4 guidance could prove a catalyst.”
The stocks are cheap, moreover, trading at just two times projected revenue for 2012, on average, he notes, even after chip shares rallied 12% from lows in August.
“The lack of negative bookings/cancels, a key driver of the ’08 debacle, bolsters our call for a relatively shallow correction this time,” writes Schafer. “We expect sub-seasonal demand and negative Q/Q growth into 4Q, but believe orders will more closely track demand now that inventories have come down.”
Schafer’s favorites are Broadcom (BRCM), Texas Instruments (TXN), Nvidia (NVDA), and Microsemi (MSCC), and Semtech (SMTC).
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