After falling over the past few weeks, Citi analyst Christopher Danely sees opportunity in chip stocks. He thinks that Micron Technology Inc. shares in particular have a chance to get back on track.
Even with Thursday’s 6% rise, Micron’s stock MU 6.07% is down almost 30% in a month. Danely wrote before the market opened, “We think it’s time to double down on Micron given the recent selloff as we believe the DRAM market will remain tight given the oligopoly.” DRAM stands for dynamic random-access memory.
He thinks the DRAM market will gain from lower capacity, which could help prices. He also said that prices may be better than expected in the third quarter.
He said he could understand why semiconductor stocks have dropped so much in value over the past few weeks. At the time he wrote his note, the PHLX Semiconductor Index SOX 6.86% was down 25% from its all-time highs.
“We think the selloff in semi stocks is due to macro factors combined with high expectations and disappointing results,” Danely wrote. He pointed out that consensus earnings expectations for the sector have dropped 11%, with Intel Corp. INTC 7.90% being one of the biggest drags.
Still, Danely’s most recent report was called “Don’t Fear the Reaper,” and he praised a chance to buy in the chip sector.
“We are still optimistic about the space because the main reasons we are optimistic—strong AI and memory—remain the same,” he wrote.
He lists the following names as “buy” candidates: Advanced Micro Devices Inc. (AMD) has a 5.95% stake, Analog Devices Inc. (ADI) has a 6.12% stake, Broadcom Inc. (AVGO) has a 6.95% stake, Microchip Technology Inc. (MCHP) has a 7.33% stake, Micron has a 6.13% stake, and KLA Corp. (KLAC) has a 7.82% stake.
All companies in the PHLX chip Index were up at least 3.3% on Thursday, showing that the chip industry was on the rise again. In general, the index was up about 6%.
Even though chip stocks have been moving up and down, Jordan Klein, a desk-based analyst at Mizuho, thinks there might be hope in the software sector. This is because recent earnings reports from companies like Fortinet Inc. (FTNT-1.79%) and Klaviyo Inc. (KVYO 33.36%) got a lot of attention.
Klein said in a Thursday note that Fortinet’s results were “a lot better than expected.” Klein also said that Klaviyo is open to smaller businesses, which had been a big area of concern for investors. He wrote, “This can help a wider sense of how people feel about software by showing that the sky is not falling.”
