Wells Fargo says chip-equipment makers to remain 'volatile' in upcoming earnings season
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Few industries felt the impact of the global supply chain slowdown in 2021 than the semiconductor sector. It seemed like hardly a day would go by without a company giving an update on how their supplies were constrained by shortages in semiconductors and other products that they needed to build everything from cars to mobile phones.

Needless to say, the chip sector is looking for more stability this year. However, an assessment of the semiconductor equipment making sector by analysts at Wells Fargo Securities says that with regards to the upcoming earnings reporting season, investors should probably gear up for some bumpy roads in the weeks ahead.
In a new report, analyst Joe Quatrochi said that trading in semiconductor capital equipment stocks, "could remain relatively volatile" over the near term as share prices are likely to be affected by any changes that companies make to their quarterly earnings and sales outlooks.
Quatrochi called KLA (NASDAQ:KLAC) his top pick among chip-equipment makers, in part because he believes the company is setting up to be in a good position to benefit from Intel's (NASDAQ:INTC) plans to boost its capital spending. KLA (KLAC) is scheduled to report quarterly results on Jan. 27, and Quatrochi said he expects the company to outline its expectations for its chip wafer and fab equipment business. In late December, Quatrochi raised his rating on KLA (KLAC) to outperform, saying that the waver and fab equipment market should grow by at least 10% this year.
Quatrochi was a bit more muted regarding Lam Research (NASDAQ:LRCX), saying that the ongoing supply chain issues, along with Lam (LRCX) ramping up production at a new facility in Malaysia are having a negative impact on the company's gross margins. Quatrochi added that investors should keep an eye on what Lam (LRCX) says about its memory chip business when it reports quarterly results on Jan. 26, as that will have an effect on the company's share price.
ASML (NASDAQ:ASML) is facing a "tough setup", according to Quatrochi, as the company recently suffered a fire at a factory in Berlin. Quatrochi said that prior to the Berlin fire, ASML (ASML) was generally seen as growing its 2022 revenue by more than 20% from last year, but that the "unknown impact" of the blaze is likely to weigh on investors' sentiment in the upcoming earnings season.
ASML's Berlin factory is responsible for making parts for lithography systems, which are then used to build the circuitry for various types of computer chips.