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Petering Apple ( AAPL ) and Samsung demand prodded a Raymond James analyst to downgrade suppliers NXP Semiconductors ( NXPI ), Qorvo ( QRVO ), Skyworks Solutions ( SWKS ) and others, even with the iPhone 7 launch expected in September. Apple suppliers broadly fell in morning trading on the stock market today . Radio-frequency chip companies Qorvo and Skyworks were down 2.6% and 2.2%, respectively, on the downgrade, tugging rival Broadcom ( AVGO ) down 1.3%. Maxim Integrated Products ( MXIM ) stock was down more than 1%, while Apple suppliers Analog Devices ( ADI ), NXP and Texas Instruments ( TXN ) stocks were all down roughly 1%. In all, Raymond James analyst Steven Smigie downgraded six semiconductor stocks to outperform from strong buy, citing likely in-line earnings and minimal upside to June guidance. Following a January drop in the stocks, the Philadelphia Stock Exchange Semiconductor Index has rebounded 20% since mid-February, Smigie wrote in a research report. Some stocks have run up 40%, he noted. But “with only modest signs that there is the potential for near-term upside to (earnings per share), and some signs of modest downside, we worry that shares have a limited upside, with reasonable downside risk,” he wrote. Confidence could improve in the seasonally stronger second half of 2016, when Apple typically launches its newest iPhone flagship. But “Apple is seeing modestly lower demand,” said Smigie, who questioned the likelihood of a positive June guide by Apple. He also noted some pain points for radio-frequency suppliers that have more than 45% exposure to Apple. “Even if the Apple guide is healthy, we think skepticism will remain until the summer when we start to get evidence of the iPhone 7 ramp and questions about iPhone SE cannibalizing other iPhone models get resolved,” he wrote. Bright Spot For Chip Outlook Samsung sales zoomed on its Galaxy S7 flagship, but pre-orders were likely influenced by free Gear VR (virtual reality) giveaways, Smigie wrote. Huawei, on the other hand, is a “bright spot” and recently guided to 120 million to 140 million units in 2016. The lion’s share of those units will be high-end smartphones, Huawei said. Outside mobile, PC and industrial results have been weak, offsetting some strength in the growing automotive and infotainment arenas — the latter being NXP’s bailiwick following its acquisition of Freescale Semiconductor. But even in the automotive segment, “we have heard concerns from a number of investors on subprime lending,” Smigie wrote. Until those fears level out, automotive-exposed semiconductors could face some headwinds. Respective estimates from industry trackers Gartner and IDC show the PC segment saw 9.6% and 11.5% year-over-year declines in Q1 shipments. And March industrial production fell 0.6% vs. expectations for a 0.1% decline, says Smigie. Smigie notes positively, “we still like many of the stories, however, so all else being equal, on a pullback we could look to get more aggressive again.” Scalper1 News
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