RBC Capital Markets analyst Mitch Steves sees demand softening for wafer fabrication equipment and organic light-emitting diode, or OLED, display gear, negatively impacting Applied Materials and Lam. But ASML will benefit from deployments of extreme ultraviolet (EUV) lithography equipment for etching chips, he said.
Steves lowered his rating on Applied Materials to sector perform from outperform and cut his 12-month price target to 55 from 64. He downgraded Lam to sector perform from outperform as well and slashed his price target to 210 from 245.
Applied Materials stock gained 0.2% to close at 50.98 on the stock market today. Lam shares fell 1.3% to 184.59.
Steves upgraded ASML to outperform from sector perform and raised his price target to 235 from 218.
ASML shares climbed 2.1% to 213.75.
Positive Outlook Longer Term
Steves has a positive outlook on chip-equipment stocks longer term, but thinks 2019 will be “a muted year before returning to growth.”
He expects wafer fab equipment spending will be flat to down next year. However, one significant area of growth in the industry will be in EUV systems from ASML, he said.
“For investors that need exposure to the group, we would recommend buying ASML,” he said in a report. “With potential monopoly pricing due to EUV we think the near-term headwinds in semi-cap will be offset by this opportunity.”