The semiconductor industry has been hammered in 2022. Early in the year, lingering effects of a supercharged growth spurt turned sour. The slide began in March of 2020 as a result of the COVID-19 pandemic. Demand from personal computer and server makers tailed off as these companies focused on clearing out excess inventories.
More recently, cost pressures have increased due to higher interest rates, weighing on original equipment manufacturers’ purchasing power. Demand for chips from the technology and auto industries has fallen in each of the past two months. Share prices that had been sliding since January began rising in late June. The shift was short-lived though. Tech stocks started sliding again in early August.
Exane BNP Paribas analyst Karl Ackerman has now waded into the pool, initiating coverage of six tech stocks, including four chipmakers and two hard drive makers.
Ackerman’s top pick is Marvell Technologies Inc. (NASDAQ: MRVL), a maker of a variety of analog, mixed-signal, DSP, embedded and standalone chips. Storage companies are among Marvell’s leading customers and have been for years. That may be partly the reason for the company’s shift in focus to enterprise-level data infrastructure.
Exane BNP has rated the stock as Outperform and placed a price target of $62 on the shares. Ackerman noted that Marvell’s strong portfolio of computing, networking and storage technologies has given it a solid grip on solutions for data centers, 5G infrastructure and the auto industry. The average price target among 32 brokerages covering Marvell is about $74.50, and the stock is a solid Buy. Shares were battered Tuesday thanks to the latest consumer price index report, which has led investors to believe that the Federal Reserve will raise interest rates again at next week’s Open Market Committee meeting. The stock traded down by about 4.3%, at around $48.10 in a 52-week range of $41.07 to $93.85.
Memory chip maker Micron Technology Inc. (NASDAQ: MU) also got an Outperform rating from Ackerman. The company’s DRAM memory business is expected to enter a cyclical downturn before the flash memory business does, but Micron’s process expertise should give the company an edge over its competitors.
Along with the Outperform rating, Ackerman put a price target of $75 on the stock, just below the $75.50 average target of 34 brokerages. Analysts are generally bullish on the stock, with 27 giving the shares a Buy or Strong Buy rating. The stock traded down by about 4.7% to $55.20, in a 52-week range of $51.40 to $98.45.
The third chipmaker to get an Outperform rating from Ackerman was Skyworks Solutions Inc. (NASDAQ: SWKS). The company’s fortunes have long depended on smartphones, but demand for new smartphones has slowed, lowering investor sentiment for Skyworks. Yet, Ackerman argues, its position as a supplier to Apple and its diversification into the auto, industrial and Internet of Things markets should position the company well for the future.
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