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On Friday, Stifel analysts indicated a cautious outlook for the semiconductor industry, anticipating a reduction in guidance and consensus estimates due to the impact of tariffs. They predict that average guidance and consensus estimates will likely decrease by 10% later in the quarter as companies assess the effect of tariffs. Furthermore, Stifel anticipates another downward revision in guidance later in the year, in light of a potential recession. Consequently, they have adjusted their coverage estimates down by an average of 20%.Want deeper insights into semiconductor stocks? InvestingPro offers comprehensive analysis of 1,400+ US stocks, including detailed financial health scores and expert-curated ProTips.
Analog Devices (NASDAQ: NASDAQ:ADI) and Texas Instruments (NASDAQ: NASDAQ:TXN) have been identified by Stifel as the top picks within the sector. This selection is based on their historical resilience and tendency to outperform during economic downturns. Broadcom Inc. (NASDAQ: NASDAQ:AVGO) follows as the third choice, with expectations that its guidance will be less affected compared to others in the industry.
Stifel has made the most significant estimate reductions for ON Semiconductor Corp. (NASDAQ: NASDAQ:ON), Intel Corporation (NASDAQ: NASDAQ:INTC), and GlobalFoundries Inc. (NASDAQ: NASDAQ:GFS). These adjustments reflect a proactive approach by the firm to align their expectations with the anticipated challenges that these companies may face in the current economic climate. InvestingPro data shows Intel's concerning financial position, with negative earnings of $4.38 per share and free cash flow of -$15.7 billion in the last twelve months. The company's revenue has declined by 2.08%, though analysts expect a return to profitability this year.
The analysts' commentary underscores the potential for a challenging period ahead for semiconductor companies as they navigate the repercussions of tariffs and brace for a possible recession. The strategic positioning of ADI and TXN as top picks suggests a belief in their ability to weather the predicted economic storm better than their peers. According to InvestingPro, Intel currently appears undervalued, with analyst price targets ranging from $17.70 to $31.00, suggesting potential upside despite the challenges ahead.
In other recent news, Intel Corporation has been in the spotlight with several notable developments. KeyBanc Capital Markets maintained a Sector Weight rating on Intel, highlighting mixed signals in the semiconductor market. Intel's advancements in its 18A node technology and securing the GPU gaming socket for the anticipated Nintendo Switch (NYSE:SWCH) 3 were considered positive, while aggressive price cuts for Lunar Lake CPUs could impact gross margin recovery. Additionally, Intel announced support for Meta (NASDAQ:META)'s Llama 4 models, utilizing its Gaudi 3 AI accelerators and Xeon processors to enhance AI workloads. These processors are designed for efficiency and are available through major cloud service providers.
The broader semiconductor industry, including Intel, faced challenges due to newly imposed tariffs by President Trump, affecting major chip-making regions like Taiwan and China. This has led to a decline in semiconductor stocks worldwide, with Intel's stock also experiencing a dip. Despite the market turbulence, Cantor Fitzgerald analysts see potential value in semiconductor stocks, including Intel, following the recent selloff. They recommend a mix of defensive and offensive strategies for investors navigating the current economic landscape. These developments reflect ongoing dynamics in the semiconductor sector, with Intel playing a key role in both technological advancements and market responses.
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