This seems to be a day to upgrade chip equipment stocks.
I noted earlier that RBC Capital’s Mahesh Sanganeria raised Applied Materials (AMAT) to a Buy, and Pacific Crest’s Weston Twigg raised his rating on Lam Research (LRCX) this morning to Outperform from� Sector Perform, with a $50 price target, without changing estimates, writing that Martin Anstice, who took over as CEO this month, is in good shape to lead the company through its $3.3 billion purchase of Novellus Systems (NVLS), announced back in mid-December.
“After our meeting with Lam�s new CEO Martin Anstice, we now feel better about the thought process that went into the deal,” writes Twigg, “as well as Mr. Anstice�s preparedness to lead the combined company.”
“This was not, in our view, Lam simply trying to buy Novellus; rather, this was a decision that stemmed from the goals for strategic growth that Mr. Anstice had established.”
The combined entity, Twigg thinks, can more effectively manage the costs of developing tools for 450-millimeter wafer production, which “in itself could save hundreds of millions of dollars over the next five to seven years.”
Twigg sees there being “enthusiasm,” not just anxiety, among Novellus and Lam employees, and he was surprised by that enthusiasm, but it bodes well, he thinks. Another reason to own Lam is that Novellus had been doing better than Lam in sales of tools for the “etch” stage of semiconductor manufacturing, and Lam will be gaining “substantial” exposure to Intel (INTC) that it has lacked.
Lam shares today are up $1.68, or 4%, at $40.18.
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