Amidst Turmoil In Semiconductor Chip Space, Analyst Picks 3 Stocks That Can Survive The Storm

  • Mizuho hosted its quarterly handset industry call for checks on the state of the global handset supply chain amidst escalating geopolitical risks and deteriorating macro conditions. 
  • Analyst Vijay Rakesh listed his key takeaways.
  • Handset component inventory was more than two times standard as distribution channels remain stressed.
  • China's demand was softer ahead of October 16 Party Congress.
  • The weaker-than-expected base Apple Inc AAPL iPhone 14 demand could extend industry time to recovery into 2H23E.
  • Qualcomm Inc QCOM could see pricing pressure (though offset by gains at Samsung).
  • They cut the C22E 5G units forecast to ~595 million, up ~8% y/y (prior: 600 million, up ~9% y/y), with demand weakness. 
  • As he looks to a potential 2023E recovery in handsets, he saw Broadcom Inc AVGO, QCOM, and Skyworks Solutions, Inc SWKS as best positioned with a better long-term roadmap and wider competitive moats. 
  • He saw AVGO (Buy; Price Target $725) well positioned with 2022E opportunities with 5G and ASIC ramps and a strong position in Wired Infrastructure and Enterprise Storage. 
  • He believes its software segment could provide further operating leverage and drive even stronger FCF.
  • He believed QCOM (Buy; Price Target $175) is well positioned in the smartphone market as a technology leader with a long-term focus on 5G and expanding into new markets in RF and Auto. 
  • He saw SWKS (Buy; Price Target $150) positioned well for the upcoming 5G ramps around the globe driven by strong iPhone, Korean OEM share gains, China OEM traction, and a significant 50-100% dollar RF content increase per handset vs. 4G. 
  • SWKS also has opportunities in its broad markets business with growth in IoT, auto, and industrials, which he believes can improve SWKS's gross margins towards its 53% target.
  • Price Action: AVGO shares traded lower by 5.02% at $437.39 on the last check Monday. 
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