AMD and three other semiconductor stocks upgraded at Barclays, three more downgraded

© Reuters.

By Louis Juricic

Advanced (NASDAQ:AMD) shares climbed pre-open after it was upgraded from Equalweight to Overweight at Barclays with a price target of $85.

Qualcomm (NASDAQ:QCOM), Seagate Technology (NASDAQ:STX), and Skyworks Solutions (NASDAQ:SWKS) were also upgraded from Equalweight to Overweight with price targets of $150, $70 and $125, respectively.

At the same time, Applied Materials (NASDAQ:AMAT) and KLA Corporation (NASDAQ:KLAC) were downgraded from Equalweight to Underweight and Veeco Instruments (NASDAQ:VECO) was downgraded from Overweight to Equalweight.

Analysts said the bank was rolling out its 2024 estimates and getting more positive on the Semiconductor group, but is incrementally more negative on semi cap equipment.

The analysts explained, "...we are more POSITIVE on companies with Data Center, PC, and Handset exposures and are Upgrading AMD, QCOM, STX, and materially raising the PT on NVDA. It would have been nice if the group got as cheap as we have seen in other downturns, but we underestimated the amount of money that wanted to move into semis and we don’t see the group testing October lows."

While it is more positive on the sector, Barclays said it isn’t going to cheerlead everything.

"It’s a new year but we still have to call it as we see it and we just don’t see any upside in Analog with the correction in Ind/Auto just starting (sorry no soft landing) and we stay negative on the Semi Cap space (in fact, are doubling down). We see the Semi Cap space as now the biggest disconnect in the group and we downgraded three names (AMAT, KLAC and VECO) as we still see WFE down in 2024 despite the expected positive tones through earnings (We are raising our hands now but may not make it on those calls...)," wrote the analysts.

Discussing AMD, they said, "AMD’s Genoa and Bergamo platforms should drive further share gains vs. INTC. AMD has a very low share at META today but should see that increase in 2H23 when META spend reaccelerates. INTC won’t have an answer until Granite Rapids/Sierra Forest (@ Intel 3), which is slated for 2024 but more likely arrives in 2025. We model 20% unit share in 2023 and 23% in 2024 with ASPs +18% in 2024."

Discussing Qualcomm and Skyworks Solutions, Barclays noted weakness in China and an Apple (NASDAQ:AAPL) overhang but the bank is looking for market improvement in 2023.

“The RF space has had very little interest for over a year and a half but it is one of the end markets we can point to for 2023 with the potential to improve. Into earnings, we actually see estimates moving lower but we do think the lower guidance will get bought given the depressed valuations (QRVO 12x, SWKS 9x, QCOM 10x P/CY24E EPS) and that this is one of the only segments where this may be the LAST cut.”