Chip companies look for stability heading into 2022’s second half

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As the midpoint of 2022 approaches, the outlook for the semiconductor market remains largely stable, but not without some industry concerns that will remain in place for several months.

That’s the sentiment from Morgan Stanley analysts Joseph Moore and Ethan Puritz, who said that in the longer-term, the outlook for chips stocks “gets murkier” even though the basic fundamentals for the industry “mostly remain strong.”

Moore and Puritz said that the results from companies that have already delivered quarterly reports have come in “roughly as we had expected” from a fundamental standpoint. Supply chain issues remain the biggest concern among investors, along with matters such as Covid-related lockdowns in China and general nervousness related to Russia’s ongoing invasion of Ukraine that have resulted in weaker-than-usual mobile phone and PC sales.

“Semiconductor buyers across all markets reflect heightened anxiety about supply chain issues,” Moore and Puritz said in a research report, adding that slowing demand remains a distant second on the minds of chip industry officials and investors.

Moore and Puritz said they remain “in line” on the semiconductor sector on the whole.

Among chip stocks, Moore lowered his price target on Analog Devices (NASDAQ: ADI) to $ 173 a share from $ 186; took down NXP Semiconductors’ (NXPI) estimate to $ 180 a share from $ 194, lowered On Semiconductor’s (ON) target to $ 56 a share from $ 60; dropped his price target on Texas Instruments (NASDAQ: TXN) stock to $ 155 a share from $ 170; lowered Microchip Technology’s (MCHP) target to $ 81 a share from $ 85, and cut its price target to $ 62 a share from $ 68.

Puritz cut his price target on Amphenol (APH) to $ 75 a share from $ 79, lowered Te Connectivity (TEL) to a target of $ 140 a share from $ 147, and cut his target price on Sensata Technologies (ST) to $ 57 a share from $ 62 .

Moore said that as far as the first half of the year went, it was “mostly good for revenues, earnings and management commentary” about business, and that more of the same should occur through the rest of the year.

Moore added that “pent-up demand” for products such as autos, graphics cards, enterprise-level hardware is helping to boost some revenue outlooks, even as consumers are expected to decline due to worries about rising inflation and the possibility of an economic recession .

“When the dust settles from shortages in the broad-based markets,” Moore said. “Customers are going to want to build very large safety stocks.”

On Friday, semiconductor kingpin Intel (NASDAQ: INTC) fell to a 52-week-low of $ 39.18 just days after company executives gave some cautious comments about its business in the coming months.

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