BofA Analyst Cuts Price Target for AMD, Re-rates Semiconductor Companies, Expects Long-Term Stock Momentum For Sector

BofA analyst Vivek Arya sees Q2 for U.S. semiconductor companies in line and modestly below Q3 on lukewarm macro, but CY24 EPS recovery could sustain longer-term stock momentum.

The analyst upgraded Camtek Ltd CAMT to Buy and raised the price target to $50 from $30 on AI packaging momentum. It reflected increasing advanced packaging penetration and continued WFE outgrowth.

CAMT is a semiconductor manufacturing equipment supplier highly exposed to some of the fastest-growing end markets in the space, including advanced packaging (~60% of sales) and compound semiconductors (~15% of sales). 

Given increased exposure to the above growth markets, the analyst sees potential for multiple re-rating toward larger front-end peers.

Arya downgraded Coherent Corp COHR, raising the price target to $55 from $42 and MACOM Technology Solutions Holdings, Inc MTSI to Neutral from Buy, raising the price target from $64 to $72, and Lumentum Holdings Inc LITE to Underperform from Neutral with a price target of $50 on sluggish telco capex, stretched valuation and overstated AI benefits.

Cloud, cars, and complexity emerged as top themes, with top Buy-rated picks including Nvidia Corp NVDA, Broadcom Inc AVGO, Marvell Technology, Inc MRVL, ON Semiconductor Corp ON, NXP Semiconductors N.V.  NXPI, Applied Materials, Inc AMAT, Cadence Design Systems, Inc CDNS, Synopsys, Inc SNPS.

Excluding product cycle themes in cloud/AI and cars/EV (electric vehicles), the analyst remained lukewarm on second-half semiconductor demand heading into earnings. 

The analyst sees in line Q2 and in line/modestly below expectations Q3 outlook in consumer (phones/PC), enterprise, telco, and industrial due to the lack of China stimulus and inflation/rates-induced deceleration in the U.S./Europe.

The analyst raised estimates and price targets for NVDA to $550 from $500, with CY24 EPS at $11.05 (vs. $10.01 prior) and CY27E EPS power of $22 (vs. $20 earlier).

The analyst also raised his price targets for MRVL to $80 from $75 and th leading EV vendor ON to $120 from $110 and complexity stocks (semicap/test/design automation).

The analyst reduced Advanced Micro Devices, Inc's AMD price target to $130 from $135 as NVDA's full-stack AI platform will pressure AMD data center GPU market share upside (alongside side risks in CPU market cannibalization).

Photo via Wikimedia Commons