Stocks: Nvidia, Intel and AMD are at risk if this Citi forecast is correct

There are at least two things that market participants are bearish on as summer approaches: shares of Bed Bath & Beyond (despite the rebound this week) and the entire semiconductor space.

Carefully watched Philadelphia Semiconductor Index (SOX) is down nearly 30% year-to-date, underperforming the S&P 500’s 15% decline. Analysts blame a sharp drop in demand for PCs following the COVID-19 pandemic for the shares’ semi-weakness. Rising interest rates also hurt sentiment around often hot names in the space like AMD and Nvidia.

And if Citi chip analyst Chris Danielly is right in a new note to clients, chip stocks could be at risk of another leg down.

Here is Danely’s call:

“Consensus estimates fell during earnings season for the first time since the pandemic triggered by a slowdown in PCs and cellphones amid the recession. We also saw the first signs of a correction in the automotive and industrial end markets and continue to believe we are entering the worst semiconductor decline in a decade given the recession and inventory build-up. We maintain our belief that each company/end market will correct and expect the SOX index to hit new lows and fall another 25%.”

Danely has a top half pick: Analog Devices (ADI) at a price target of $195/+26% upside potential

“We expect EPS to be accretive due to the revenue and expense synergies from the Maxim acquisition.”

AMD and NVIDIA GeForce stickers are seen on a laptop in this picture taken December 1, 2021. REUTERS/Dado Ruvic/Illustration

AMD and NVIDIA GeForce stickers are seen on a laptop, December 1, 2021. REUTERS/Dado Ruvic/Illustration

The Industrial Atmosphere in Semiconductors:

Nvidia Earnings Alerts, AMD, Micron and Intel have taken center stage for investors over the past two months. Shares of those four chip giants are now down an average of 40% since the start of the year, according to analysis by Yahoo Finance – the worst performer is Nvidia, down 47%.

Meanwhile, IDC predictions global PC shipments will fall 8.2% year-on-year this year to 321.2 million units as the post-Covid demand hangover continues.

“We believe we are at the bottom. We have made this very clear that we are below the shipping prices to our customers. So we’re seeing that recover naturally. Also, as we get into the second half, you have some of the natural cycles like the holidays. So they all give us confidence in the guidance we’ve given.”

Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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