Selloff in Chip Stocks is a Buying Opportunity – Daiwa
2022.04.20 14:51
Selloff in Chip Stocks is a Buying Opportunity – Daiwa
Daiwa Securities analyst Louis Miscioscia has reiterated his bullish stance on chip stocks despite a strong selloff witnessed in recent months.
Philadelphia Semiconductor Index (SOX) hit the 11-month low earlier this week. SOX was trading 26% off the all-time high at one point before rebounding yesterday.
Still, Miscioscia expects semi stocks to rebound in the second half of the year.
“To us, there is somewhat of a similarity to what happened last year which resulted in strong share price appreciation for CY21. For example in 2021 AMD (NASDAQ:AMD), Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA) and Qualcomm (NASDAQ:QCOM) were up 57%, 34%, 125% and 20%, respectively, or as a group 58%, granted mostly driven by Nvidia,” the analyst wrote in a client note.
Miscioscia argues that the history will repeat itself with the majority of the time with Fed tightening, stocks do well 6 months out. On “why” this is the case, the analyst wrote:
“Positive fundamentals have not changed. The six material tech drivers should continue, they are: 1) Artificial Intelligence & Industrial Automation (IA), 2) Gaming, 3) Cloud, 4) 5G, 5) Electric Vehicles (EVs) / ADAS (Advanced Driver Assistance Systems), 6) WFH replaced by MBO (Move Back to Office) and Enterprise demand.”
The analyst added that he expects to see “attractive at or around double-digits” top and bottom line growth during the earnings season.”
On a more negative note, Miscioscia doesn’t expect supply to catch up to demand until 2023 given recent lockdowns in China.
Net-net, the analyst reiterated Buy rating and Top Pick designations on AMD, Apple, Nvidia, and Qualcomm.
“We believe the positive tech demand will eventually result in good growth, resulting in share price rebound and appreciation as we move through the year, thus we have to say, buy the dips,” the analyst concluded.
By Senad Karaahmetovic
