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Here's Why This Analyst Remains In Line On US Semiconductor Companies

  • Morgan Stanley analyst Joe Moore remained in line on U.S. semiconductors, recognizing obvious cyclical challenges that he thinks are partly priced in but still material uncertainty about where estimates can bottom. 
  • He notes that most U.S. semiconductor companies have not yet guided down, except for PC and some smartphone names, including memory.
  • Given economic deceleration and inventory excess around a once-in-a-generation supply chain crisis, he sees at least some risk to virtually all company consensus estimates for next year. 
  • In terms of his specific memory view versus the Asia team naming SK Hynix HXSCL as a top pick, he similarly sought value in the challenging memory complex. 
  • Moore has an Overweight rating on both Lam Research Corp LRCX ($543 price target) and Western Digital Corp WDC ($65 price target). Both should have a challenging fundamental outlook (extremely so in the case of WDC) that he would argue discounted by current valuations. 
  • He continues to be Underweight on Micron Technology, Inc MU ($49 price target), the closest comp to Hynix in his coverage, but with materially different trading patterns around the two stocks. 
  • In the long term, Micron has a healthy balance sheet and continues to execute well in product roadmaps and like-for-like price declines. 
  • Moore generally does not disagree with views that the company is in a strong position longer term. 
  • Challenges drive the cautious view he foresees in the next 12 months versus an optimistic consensus.
  • Price Action: LRCX shares traded lower by 0.29% at $399.46 on the last check Wednesday.

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