Earnings season kicks off this week for chip stocks such as ASML, which could see increased volatility.Will chip stocks see a rally this week?
Few industries will be more affected by the global supply chain slowdown in 2021 than semiconductors, with expectations for a more stable chip industry this year. Still, Wells Fargo's assessment of the semiconductor equipment manufacturing industry suggests investors may want to brace for a bumpy few weeks in terms of the upcoming earnings season.
Wells Fargo analyst Joe Quatrochi said semiconductor equipment stocks are "likely to remain relatively volatile" in the short term as any changes to quarterly earnings and sales outlooks could affect stock prices.
Quatrochi said KLA(Klac.us) is his top choice among chip equipment makers and he believes KLA will benefit from Intel's (INTC.US) plans to increase capital spending. KLA is scheduled to report quarterly results on January 27, and Quatrochi said he expects the company to outline its expectations for its chip wafer and wafer equipment businesses. In late December, Quatrochi upgraded his rating on KLA, seeing 10% upside in the stock this year.
Quatrochi was a bit more pessimistic on Lam Research (LRCX.US), saying ongoing supply chain issues and ramping up production at Lam's new plant in Malaysia had a negative impact on the company's gross margin. Lam is due to report quarterly results on January 26 and investors should pay close attention to its views on the memory chip business as this will have an impact on the stock price, Quatrochi added.
Quatrochi believes ASML (ASML.us) is facing a "difficult situation" because of a recent fire at one of its plants in Berlin. Before the Berlin fire, AsML's 2022 revenue was widely believed to be more than 20% higher than last year, but the "unknown impact" of the fire could weigh on investor sentiment during the upcoming earnings season, Quatrochi said. Asml reports results next Wednesday.
Submitted January 17, 2022 at 08:40AM by abigaillv700
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