Bernstein believes three semiconductor stocks can outperform if the economy enters a recession.
On Monday, chip analyst Stacy Rasgon cautioned investors the economic environment seems to be getting worse. Therefore, they need to assess which stocks are better positioned for that potential outcome.
“The consumer is entering into something akin to recession, with broad downticks in expectations (some quite sharp) across many end markets,” he wrote.
The analyst said there is increasing evidence of additional weakness in chip business trends and fundamentals. He cited rising inventories at companies which are “well above historical norms.”
), which are all Outperform-rated by Bernstein. He has a $675 price target for
and a $135 target for AMD. For Qualcomm, he has $175 stock forecast.
According to Rasgon, Broadcom has better visibility on its future orders than its competitors and its software business may be able to buffer some of the semiconductor industry’s volatility. He also noted the company’s high profit margins and attractive valuation.
He said AMD should be able to thrive even in a tougher PC industry market because of its stellar product execution. “AMD looks to be taking increasing advantage of Intel’s missteps, and the pullback has resulted in valuation that could be considered downright attractive,” he wrote. “The company continues to fire on all cylinders.”
Regarding Qualcomm, Rasgon predicts the chip maker can do well on the back of its exposure to high-end smartphones, an area that is holding up relatively better than the overall mobile market.
“In this environment we continue to believe AVGO in our coverage likely has the least cyclical risk,” he wrote. “However, we do see some opportunities in names with solid structural stories at attractive prices (such as AMD and QCOM).”
In early trading Monday, shares of Broadcom rose 1.3%, to $529.17, and Qualcomm traded up 1.2%, to $133.67, while AMD fell 1.1%, to $84.43. The
was up 1%.
Write to Tae Kim at [email protected]