KeyBanc Sees Semiconductors' Recessionary Fears Largely Priced In; Gives Out Top 5 Picks

KeyBanc analyst John Vinh's quarterly semiconductor cycle analysis highlighted certain aspects.
Firstly, he saw the current correction in the SOX essentially already appears to reflect risks associated with a recession, with the current 52% contraction in forward P/E multiples beating the 48% peak-trough observed during the 2008- 2009 recession.
Secondly, the Q1 IC shipments remained strong, while the China lockdowns negatively impacted May shipments.
Thirdly, aggregate supply chain inventories increased further, above historical levels for the third time in this upcycle— with inventories likely to increase further in 2Q, he saw a higher risk of a correction.
Fourthly, he slightly raised his 2022 IC revenue forecast to +14% from +13% prior, with better pricing offsetting lower units.
He noted that despite indications of an upcoming correction and recessionary fears, the peak-trough analysis would suggest that the current pullback already reflected many of these concerns.
He favored Advanced Micro Devices, Inc AMD (reiterated Overweight; PT $130), Marvell Technology, Inc MRVL (maintained Overweight; PT $90), Nvidia Corp NVDA (reiterated Overweight; PT $230), ON Semiconductor Corp ON (maintained Overweight; PT $80), and Qualcomm Inc QCOM (reiterated Overweight; PT $220).
Price Action: AMD shares traded lower by 4.16% at $87.32 on the last check Friday.

Analyst Calendar