Written by Sinad Karahimetovic
Citi analysts lowered their estimates for quasi-equities after the latest round of checks that indicated delays and cancellations Analog devices (NASDAQ 🙂 warned of it in July, and it’s now hitting the rest of the analog sector.
The reason for the decline is primarily due to weak demand in Europe, as well as an increase in inventories. As a result, analysts see both. NXP Semiconductor (NASDAQ: and Texas Instruments (NASDAQ :)) reported poor bookings.
“We reiterate our belief that this is just the beginning of the downturn and that every company/every end market will feel it. We expect the Microchip to finally feel it as it has the longest lead times. We continue to prefer ADI as our top pick due to its defensive nature.”
NXPI, TXN and Microchip (NASDAQ:) lowered their earnings estimates for Citi to reflect declining lead times.
Analysts also reiterated their bearish stance in the broader semiconductor sector, and believe that (the PHLX semiconductor sector), used as a key gauge for the chip sector, will reach new lows again as “the contraction gains strength and estimates are lowered.”
They expect chip stocks to bottom out in the first half of 2023, which should happen after “every company aggressively lowered their ratings, capitulation resulted in shares trading near lower valuations in the new estimates, and capex cuts have gone through memory and logic, and foundry.”
Citi’s 2023 EPS is now 20% below consensus after recent discretionary cuts. Among other things, analysts believe Micron (NASDAQ:) continues to act as a leading indicator of the sector’s contraction.