Analysts see ongoing chip strength in March data despite some seasonal slowness
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Looking back over March's semiconductor sales data, Wall Street analysts are positive about what's seen as "robust," broad strength - even if it's normalized a bit for the season after a strong February.
The weekend brought news from the Semiconductor Industry Association that global chip sales rose 1.1% in March from February, to $50.6 billion; that brought Q1 to $151.7 billion (up 23% year-over-year - but down 0.5% from the fourth quarter).
Growth was below seasonal on a sequential basis, Evercore analyst C.J. Muse says - driven mainly by Memory, discrete, and MCU - but year-over-year growth is "broad-based, supported by favorable pricing trends."
The firm is maintaining its calendar 2022 revenue forecast for the industry (and notes the Street's now in line with its view) - for revenue growth of 17% to $650 billion. Muse also expects a "soft landing" for chips in 2023, down 5% year-over-year.
"With cycle concerns exacerbated by recession risk, focus for investors remains on positioning, range-bound trades, and bottom-up idiosyncratic stories as well as those levered to favorable end markets (i.e. data center/networking)," Muse says.
The best ideas for such a "soft landing" are those stocks that can show secular growth (in other words, Nvidia (NASDAQ:NVDA) and Marvell (MRVL)); "better than feared" wafer fab equipment (that includes ASML, Applied Materials (AMAT), Lam Research (LRCX) and KLA (KLAC)); and defense (Analog Devices (ADI), Broadcom (NASDAQ:AVGO) and MACOM Technology Solutions (MTSI)).
"After a curiously high February, the SIA monthly data seems to have normalized in March" is Deutsche Bank's takeaway, and it's expecting growth to normalize to around the +7% range for semiconductors ex-Memory "with cross-currents of loosening supply but potentially moderating demand."
Morgan Stanley said the month just missed its expectations but was still strong, and consistent with the ongoing supply-chain challenges. It's just In Line on the sector, but sees some potential for upward revisions in Lam Research (LRCX), Qualcomm (QCOM), Western Digital (WD), Broadcom (AVGO) and Microchip Technology (MCHP).
Citi meanwhile is expecting 2022 growth of 13%, counting on demand and pricing to stay firm at least through the first half of 2022. It's favoring stocks that can expand margins like Micron (NASDAQ:MU), GlobalFoundries (GFS), ON Semi (ON) and Analog Devices (ADI) in its look ahead to the week's earnings.
Among prominent names on the move up for semiconductors in today's post-SIA action: Monolithic Power Systems (MPWR) is 3.2% higher; Nvidia (NVDA) is up 2.5%; NASDAQ:AMD is up 2.6%; Broadcom (AVGO) is up 2.4%; Intel (INTC) is up 1.2%.