Is Now the Time to Buy Semiconductor Stocks?

Seagate Technologies STX announced yesterday the company's preliminary second quarter financial results, which were better than expected. Seagate also updated its third quarter outlook, as it believes that the unit demand will exceed supply in 2012. The company says “the March 2012 quarter, and before giving effect to the acquisition related charges referenced above, it expects unit shipments to increase as compared to the December quarter, revenue of $4.2-$4.5 billion, gross margin as a percent of revenue of at least 33%, and operating expenses to be approximately $415 million.” This positive outlook is a relief to the investors who have put their money in the semiconductor sector that has been hit hard by the 2011 floods in Thailand. As a result, Seagate Technologies is trading 5.59% higher today. Seagate CEO, Steve Luzco, mentions that the company's better than expected preliminary results “also reflect the hard work and resiliency of the Seagate teams and our strategic suppliers who are working to help the industry recover from the massive disruption caused by the flooding in Thailand.” The better than expected preliminary results could a positive signal for other semiconductor companies that have been under pressure due to flooding in Thailand. On today's trading session, LSI Corporation LSI is up 7.72%, STEC, Inc STEC +6.39%, OCZ Technology Group OCZ +7.18%, and Western Digital Corp WDC +4.79%. Analyst also welcomed the positive news, as Seagate's price target was raised today at Citigroup, FBN Securities, Goldman Sachs, and JP Morgan today. Additionally, Wedbush upgraded LSI Corporation from Neutral to Outperform raising its price target to $8.50. It is possible that we will see more upgrades in this sector, as Seagate's better than expected outlook may cause the analysts to revisit their earlier estimates. You can follow me on Twitter @TuomoKallio