Semiconductor stocks have been struggling this year as DRAM chip prices keep fluctuating and PC demand continues to decrease. The Market Vectors Semiconductor ETF (SMH) has fallen approximately 3% year-to-date, compared to a 32% increase in 2014. Five-star analyst Vijay Rakesh of Mizuho weighed in on Intel Corporation (NASDAQ: INTC) and Qualcomm, Inc. (NASDAQ: QCOM) on July 14 amid rumors that semiconductor stocks are headed for a sell-off.
It’s safe to say that Intel has been significantly impacted by the fall of the PC, having plummeted over 18% year-to-date. The company is one of the world’s largest providers of PCs, which account for approximately 58% of Intel’s total revenue.
The company is also slated to post Q2 2015 earnings on July 15 after market close. The upcoming earnings report is expected to be the first report in two years to post a year-over-year sales decline due to decreasing demand in the PC business.
Rakesh has a Neutral rating on Intel with a price target of $32, citing that the company’s “core PC client market remains soft.” The analyst points out the company’s efforts “to reposition away from PCs” and sees “some respite with Windows 10.” However, the analyst believes “the stock remains a tough proposition for investors at current levels.”
Rakesh has rated Intel 18 times total since 2009, earning a 100% success rate recommending the company and a +17.2% average return per recommendation when measured over a one-year horizon and no benchmark.
As a result of the fall of the PC, Qualcomm has taken a hit this year due to DRAM chip price fluctuations since the chips are used in PCs. Additionally, Qualcomm shares fell earlier this year after news broke that Samsung Electronics opted out of using the company’s applications processor in its new Galaxy S6 smartphone due to issues with the “Snapdragon 810” part overheating during Samsung tests. The stock is currently down approximately 14% year-to-date.
Rakesh gave Qualcomm a Neutral rating with a price target of $68. The analyst names the company as “an industry leader [in] developing key wireless CDMA protocols and chipsets” and believes it has “a strong licensing model.” However, Rakesh also notes that Qualcomm is now facing “headwinds from a slowing handset market, increasing pricing pressure in its core handset processor markets, in-sourcing of handset processors at OEMS, lower licensing revenue, and compliance challenges in China.”
He adds, “While the need for speed and bandwidth is driving a positive upside move from 2G to 3G/4G, and a global connected world, several challenges keep us on the sidelines.”
Rakesh has rated Qualcomm 8 times total since 2009, earning a 67% success rate recommending the stock and a +11.6% average return per recommendation when measured over a one-year horizon and no benchmark.
Overall, Vijay Rakesh has a 70% success rate recommending stocks and a +33.4% average return per recommendation when measured over a one-year horizon and no benchmark.