By Senad Karaahmetovic
KeyBanc analysts slashed price targets on several chip companies to reflect “mostly negative” supply chain checks. According to them, feedback suggests that the correction in Asia worsened in Q4 as China reopens.
The downturn is negatively impacting consumption, while end demand is softening.
“We’re seeing indications of an incremental slowdown across most end markets including PC, smartphones, consumer, data center, industrial, and automotive. With broader inventory destocking ongoing, we see 4Q22 channel resales tracking down 5% q/q, as compared to +5% previously and for 1Q23 resales to be down 5-10% q/q,” they said in a client note.
The findings are most negative for computer semi stocks, including Advanced Micro Devices Inc (NASDAQ:AMD), Intel (NASDAQ:INTC), Marvell (NASDAQ:MRVL), and Nvidia (NASDAQ:NVDA). The feedback was also negative for analog and smartphone semi stocks.
“Feedback indicates signs of cloud demand softening, mostly at Meta, with signs of moderation at AWS and Google, while the outlook at MSFT Azure remains robust,” the analysts added.
New price targets for Nvidia and AMD are $220 and $80 per share, respectively, signaling an upside potential of about 38% and 17%. The analysts also cut price targets on Marvell Technology Group Ltd (NASDAQ:MRVL) and Qualcomm (NASDAQ:QCOM) to $65 and $150 per share, respectively.
“We continue to see a “soft landing” scenario and believe semiconductor companies are in a much better position to navigate this downturn given better visibility, more secular drivers, and better pricing leverage as selective price increases continue,” they concluded.