With warnings having started from key leaders in the realm of chip stocks, the question is whether or not you can trust the analysts and the consensus upside.  24/7 Wall St. has gone in and evaluated the leaders in each aspect of the semiconductor sector to see where there is value and where the risks currently lie.  We evaluated the following chip companies: Intel Corporation (NASDAQ: INTC); QUALCOMM Incorporated (NASDAQ: QCOM); Texas Instruments Inc. (NASDAQ: TXN); Broadcom Corp. (NASDAQ: BRCM); NVIDIA Corporation (NASDAQ: NVDA); Advanced Micro Devices, Inc. (NYSE: AMD); Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM); Freescale Semiconductor Holdings (NYSE: FSL); SanDisk Corporation (NASDAQ: SNDK); Applied Materials Inc. (NASDAQ: AMAT); Lam Research Corporation (NASDAQ: LRCX); and Altera Corporation (NASDAQ: ALTR).

In a further effort to show just how much these have sold off, we have shown the moves in the following key semiconductor ETFs: Market Vectors Semiconductor ETF (AMEX: SMH); SPDR S&P Semiconductor (AMEX: XSD); and the ProShares Ultra Semiconductors (AMEX: USD).  We have also run the same screens in retail, gold and silver miners, conglomerates, industrial giants, and major oil companies with links to those at the end of this article. Here is the screening of value and upside in the chip giants:

Intel Corporation (NASDAQ: INTC) traded at $26.60 with a market value of $129 billion.  The consensus target price for the king of PC processors from Thomson Reuters is $29.75 and the 52-week trading range is $19.16 to $29.27.  This DJIA component’s most recent yield was listed as 3.2%. Intel’s implied upside to the consensus target is 16% and it is worth noting that the consensus target is just above the 52-week high.

QUALCOMM Incorporated (NASDAQ: QCOM) traded at $57.78 with a market value of $99 billion.  The consensus target price from Thomson Reuters is $71.92 and the 52-week trading range is $45.98 to $68.87.  The CDMA giant yields about 1.7% after dividend hikes. The implied upside to the consensus target is just under 25% but we would note that the consensus target is still over $3.00 above the 52-week high.

Texas Instruments Inc. (NASDAQ: TXN) traded at $29.15 with a market value of $33.4 billion.  The consensus target price from Thomson Reuters is $35.80 and the 52-week trading range is $24.34 to $35.30.  The yield here is about 2.3%. TI’s implied upside to the consensus target is just under 23% and that target is still just above its 52-week high.

Broadcom Corp. (NASDAQ: BRCM) traded at $31.85 with a market value of $17.5 billion.  The consensus target price from Thomson Reuters is $43.21 and the 52-week trading range is $27.59 to $39.66.  Broadcom has a paltry yield of only about 1.2%, but its implied upside to the consensus target is about 35%.  Be advised that this consensus target is almost $4.00 above the 52-week high.

NVIDIA Corporation (NASDAQ: NVDA) trades at $12.25 and its market cap is just over $7.5 billion. This graphics processor leader has a consensus target price of $16.64 and the 52-week trading range is $11.47 to $20.05.  NVIDIA pays no dividend and that is something which it should consider changing since it has about $3 billion in cash and liquidity. Its implied upside to the consensus target is about 35% and that consensus target price is well under its 52-week high.

Advanced Micro Devices, Inc. (NYSE: AMD) trades at $6.06 and its market cap is only $4.25 billion despite it being so actively traded. The consensus target price for this distant number-2 in PC processors is $8.55 and the 52-week trading range is $4.31 to $8.71.  AMD has no dividend due to very spotty earnings. Its implied upside to the consensus target is more than 41% if you trust the analysts here and its target price is just under its 52-week high.

Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) currently trades at $14.15 for its ADR and Yahoo! Finance shows its market value being about $73 billion.  The consensus target price from Thomson Reuters is $16.70 and the 52-week trading range is $10.75 to $16.15.  The yield is listed as roughly 2.9%. TSM’s implied upside to the consensus target is 18% and the consensus target is about 4% above the 52-week high.

Freescale Semiconductor Holdings (NYSE: FSL) has been battered since its IPO and shares now trade at $9.75 with an implied market value of $2.4 billion.  This private equity backed chip outfit’s consensus target price from Thomson Reuters is all the way up at $17.92 and the 52-week (less than one-year actually) trading range is $9.43 to $20.97.  Freescale has NO DIVIDEND, which makes it stand out against the peer group now.  Still, if you trust the analysts here the implied upside to the consensus target is a whopping 83%!  Trust is hard to come by here, particularly for a company where backers will sell shares along the way into strength.

SanDisk Corporation (NASDAQ: SNDK) trades around $32.50 and its market value is about $7.9 billion.  The king of flash memory’s consensus target price from Thomson Reuters is $44.46 and the 52-week trading range is $31.34 to $53.46.  SanDisk has no current dividend, something which may need to change down the road considering that this is not anywhere close to a new company.  Its implied upside to the consensus target is 37% but the company has had two warnings.

Applied Materials Inc. (NASDAQ: AMAT) currently trades at $10.55 and its market value is $13.6 billion.  The consensus target price from Thomson Reuters is $13.65 and the 52-week trading range is $9.70 to $13.94.  Applied now yields about 3.4% and its implied upside to the consensus target is about 29%.

Lam Research Corporation (NASDAQ: LRCX) is worth more than $4.5 billion today but it is acquiring Novellus Systems, Inc. (NASDAQ: NVLS) for about $3 billion in stock, so it will soon be larger.  Its shares trade at $38.00, its consensus target price is $48.53 and the 52-week trading range is $34.81 to $48.88.  Lam Research pays NO DIVIDEND now and its implied upside is almost 28%.

Altera Corporation (NASDAQ: ALTR) currently trades at $33.90 and its market value is $10.9 billion.  The consensus target price from Thomson Reuters is $41.00 and the 52-week trading range is $30.39 to $48.91.  Altera has a dink yield of only about 1% and we expect a dividend hike in the coming weeks or months. Its implied upside to the consensus target is about 21% and this one is well off highs and the target is almost $8.00 under its 52-week high.

Market Vectors Semiconductor ETF (AMEX: SMH) has undergone a total transformation since it is no longer the Semiconductor HOLDRs.  At $31.25 its range since the change is listed as $28.86 to $36.17.  This ETF is said to have assets of almost $400 million, but that changes based upon inflows and outflows on top of the change in the price.

SPDR S&P Semiconductor (AMEX: XSD) ETS is now one of the longest ETF in chips since the HOLDRS changed.  At $43.50 now, its 52-week range is $40.09 to $59.85 and it still has only about $44 million in assets.  This one peaked in January and the mix of components has made it more volatile than many leaders.  This ETF would now have to rally by more than 37% to hit its 52-week high again.

ProShares Ultra Semiconductors (AMEX: USD) uses leverage of 2-times for its semiconductor trading, so this is one where it will feel just like getting your fingernails ripped out when your timing is wrong. At $33.50, this leveraged ETF has a 52-week range of $26.18 to $46.46. It would have to rally about 39% to hit its 52-week high again.

As you can see, the semiconductor and chip leaders have now pulled back substantially from their highs seen throughout 2012.  The issue to consider is that Dell Inc. (NASDAQ: DELL) and Hewlett-Packard Co. (NYSE: HPQ) have confirmed that PC sales are slowing.  Some of this is due to Apple Inc. (NASDAQ: AAPL) and some of it is due to weakness in Europe, weak PC spending in the Americas, and a slowing of growth in the BRIC nations.  How the Microsoft Corporation (NASDAQ: MSFT) launch of Windows 8 will impact the PC refresh cycle ahead is now another wild card since PC sales guidance is looking softer than anticipated from just a couple of weeks ago.

We also want to warn investors to not just blindly trust the analysts in semiconductor price targets here.  Summer can be a brutal time for chip stocks.  The drop in the ProShares Ultra Semiconductors (AMEX: USD) during the summer of 2011 was about 40% and the drop from the 52-week high in 2011 to that end of summer trough was almost 50%.

The drop in the SPDR S&P Semiconductor ETF (AMEX: XSD) during the summer of 2011 was about 25%, but the drop from the peak in early 2011 here to the trough of late-summer was about 31%.

Summer is a very tough time to invest in chip stocks, and the question now is just how much the slowdown is going to continue taking out of chip stocks.  We would certainly avoid trying to play the game of trying to catch falling knives here, but these are all worth keeping an eye on for those inflection points where the valuations start to adequately discount the warning signs.

Gold & Silver Miners with the Most Upside Value  

Major Oil Companies with the Most Upside Value

Industrials with the Most Upside Value  

Conglomerates with the Most Upside Value

Retail Stocks with Upside 

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JON C. OGG

A report at Reuters names South Korea’s SK Hynix and US chip maker GlobalFoundries as two firms the unhappy bondholders have begun discussions with. At the time that Micron was declared the winning bidder, the only other competitor was a combined bid from two Japanese private equity firms.

If a couple of private equity firms think that Elpida is worth less than Micron thinks it’s worth, then it doesn’t make a lot of sense to believe that either Hynix or GlobalFoundries will think Elpida is worth more. Elpida’s debt is more than double the price Micron has offered to pay, so it’s no surprise that the bondholders want to smoke out a higher bid. At best they’re probably hoping to get another bid that is slightly better than Micron’s in the hope that Micron will bid again. Another possibility is that one of the private equity firms will take part with one of the chip makers, lowering the amount of capital at risk, but likely to muddy the waters over who’s in charge and what the strategy should be going forward.

Micron’s shares are up 0.8% in the pre-market, at $5.67 in a 52-week range of $3.97-$10.23.

Paul Ausick

News on Wednesday night showed that Chief Financial Officer Mark Murphy is leaving the company to rejoin a position at Praxair.  The news is on the heels of previous report showing a major loss due to poor solar materials sales. Does the notion that MEMC named Brian Wuebbels as executive vice president and CFO help?  Not really, even if Murphy will act as a “consultant” during the transition period.

Losing a CFO is not as bad as losing a founder and not as bad as losing a CEO, but the problem with losing a CFO is that Wall Street assumes that the CFO has lost faith in the future of the company. In some cases, it could mean something far worse.  With MEMC shares having fallen from over $90 during teh solar boom down to under $2.00 it is easy to wonder if things are going from just awful to even worse.

So, here is where we cannot help but wonder about MEMC’s future.  Thomson Reuters expects a loss of -$0.10 EPS in 2012 on sales of $2.6 billion.  But almost magically in 2013 the consensus is back up to $0.45 EPS on $2.83 billion in sales.  The revenues in 2011 were $2.715 billion, in 2010 they were $2.239 billion, and 2009 revenues were $1.163 billion.  The problem is that sales in the solar sector are getting harder and harder to come by and the solar sector is in total disarray.  The company’s latest loss and decline in revenues also reflected weak demand in the semiconductor wafer markets.  Yep, MEMC is facing a war on two fronts and its non-GAAP margins are getting squeezed.

The sector leaders are looking like hell frozen over.  First Solar Inc. (NASDAQ: FSLR) is effectively at all-time lows if you discount a small 2% gain today.  SunPower Corporation (NASDAQ: SPWR) is down over 75% since Total SA (NYSE: TOT) bought the controlling interest.

If the company was on the verge of a great turnaround then the CFO would seemingly not have pulled the ripcord on the way down here.  The company has what looks to be ample cash reserves to fund operations, but it also has significant amounts of long-term debt. This situation just feels like it is one which is going from awful to far worse.

MEMC is in serious trouble.  Still, it is one of these outfits that has enough cash to fund operations for probably quite some time, but its core businesses are challenged and the company has so far been unable to get its operating costs in order.  It has also forecast a weaker demand for semiconductor materials in 2012 as well as a lower price per watt in solar.  Our big concern is that the projections may have been based entirely upon the CFO forecasts just a week or so ago, and his departure would bring even the lower guidance into question.

For whatever this is worth, Wunderlich Securities cut its target down to $1.00 after it maintained a SELL rating after the most recent earnings.

It is too soon to declare that MEMC will be a total implosion.  It is even possible that there could be a turnaround of major proportion coming here.  Unfortunately, that does not appear to be the case any time in the immediate future.

So you tell me in a poll, no “I don’t know” answers allowed…

JON C. OGG

The company’s CEO could barely contain his enthusiasm:

Kepler GPUs [graphics processing units] are accelerating our business. Our newly launched desktop products are winning some of the best reviews we’ve ever had. Notebook GPUs had a record quarter. And Tegra is on a growth track again, driven by great mobile device wins and the upcoming Windows on ARM launch.

Nvidia, which licenses designs from ARM Holdings plc (NASDAQ: ARMH), may be getting back on track following a couple of weak quarters. Like other ARM licensees such as Qualcomm Corp. (NASDAQ: QCOM), Apple Inc. (NASDAQ: AAPL), and Texas Instruments Inc. (NASDAQ: TXN), Nvidia is profiting from the explosive demand for mobile devices like smartphones and tablets.

The company’s growth prospects are further enhanced by a decision from Microsoft Corp. (NASDAQ: MSFT) to release a version of is Windows 8 operating system for ARM-based processors, the company’s first foray from the x86-designs of Intel Corp. (NASDAQ: INTC) and Advanced Micro Devices Inc. (NYSE: AMD).

Nvidia forecast second quarter revenue of $990 million to $1.05 billion, significantly above the current consensus estimate of $976.2 million. Non-GAAP gross margins are also expected to rise from 50.1% in the first quarter to 51.5% in the second quarter.

The company’s share price is down about -45% since the beginning of 2011. Nvidia’s forward P/E ratio in February of 2011 was north of 63. That has fallen to 13.65 today, indicating an abundance of enthusiasm from investors that the company simply couldn’t deliver on. The situation is changing now, and Nvidia might actually be set to deliver the goods.

Shares are up 9.5% in the pre-market this morning, at $13.58 in a 52-week range of $11.47-$20.52.

Paul Ausick

Solar panel makers like First Solar Inc. (NASDAQ: FSLR), SunPower Corp. (NASDAQ: SPWR), Suntech Power Holdings Co. Ltd. (NYSE: STP), and Yingli Green Energy Holdings Co. Ltd. (NYSE: YGE) have watched panel prices erode about -50% in the last year. Polysilicon prices have dropped -70% and companies like MEMC simply can’t reduce costs fast enough to keep up with collapsing demand and a race to the bottom on polysilicon prices.

MEMC’s adjusted gross margins for the quarter were down to 10% from 11.6% in the previous quarter and full year 2011 margin of 18%. Perhaps the worst news of all for the company is that its SunEdison division which designs and installs solar PV systems installed new projects totalling 49 megawatts in the first quarter, down -55% sequentially and -11% year-over-year.

The company also forecast somewhat weak revenue growth for the second quarter and a revenue drop for the full fiscal year. The company said its sales volume for the full year would be more than 400 megawatts and that second quarter volume would be 130-170 megawatts. Taking a midpoint of 150 megawatts and first quarter sales of just 47 megawatts, that estimate indicates expected growth in the second half of the year. MEMC better hope so.

Shares of MEMC are down -24% today, at $2.47 after posting a new 52-week low of $2.46 earlier. The prior 52-week range was $3.20-$11.31.

Paul Ausick

Analyst Vijay Rakesh noted, “1) Muted reaction pending more clarity on the final amount that MU will pay, and 2) Based on that if MU needs to come to market for any additional financing. Nonetheless we would be buyers with MU paying only 30-35c or less per dollar for the deal… We believe some of the muted reaction is because of no Official comments thus far and investors waiting to see how much the deals ends up to be.”

Whether the deal comes to $2 billion or $2.5 billion, Stern Agee’s note is talking up the Hiroshima fabrication plant with 120,000 wafers per month of 30nm/300mm manufacturing and 64% ownership in the Rexchip fab, as well as the Akito Elpida Back end Packaging and 3 to 4 design centers.  The assets were carried on Elpida’s books at about $7 billion but the firm’s take is that the assets with Elpida’s Memory intellectual property is worth more than $7 billion.  If so, then Micron is paying thirty to thirty-five cents on the dollar or even less if the deal includes future Potential Capex for Elpida.

Stern Agee concludes, “Given the pace of negotiations, we believe the deal should be accretive L-T and drive consolidation, price stability and profitability in the DRAM marketplace.”

Micron shares are trading up $0.03 at $6.53 on first look and the 52-week trading range is $3.97 to $10.93.

JON C. OGG

Here is a big figure that goes back rather far: Taken together since their inception, Intel’s dividends and stock buyback program have returned approximately $112 billion to stockholders.

While there is not any new guidance from its earnings report last month, Intel is maintaining the stance that 2012 is expected to be “another year of record revenues for Intel.”  The core business, its progress in smartphones, and other new growth areas drove ability to raise its payout.

Intel shares are up marginally at $27.94 and its 52-week range is $19.16 to $29.27.

JON C. OGG

Elpida filed for bankruptcy in February, and at that time Micron and Intel Corp. (NASDAQ: INTC) were said to be in the running to acquire the company. Micron reportedly made an offer of $1.5 billion at the time.

If the report is accurate, Micron may have found one way to keep DRAM prices from falling even more as well as a way to keep up in the race to integrate CPU, GPU, NAND flash and mobile DRAM chips onto a single chip.

Micron’s shares are up about 4.5% after a half-hour of trading this morning, at $6.76 in a 52-week range of $3.97-$11.13.

Paul Ausick

Apple shares are up over $56.00 at $616.74 on last look and we have already seen more  than 1 million shares trade in the pre-market with well over an hour until the open.  Here are some of the moves in the Apple component players:

Advanced Micro Devices Inc. (NYSE: AMD) is up over 1% at $7.40 on thin volume.   Broadcom Corp. (NASDAQ: BRCM) is up 4.6% at $34.42.

LSI Corporation (NYSE: LSI) is indicated up around $8.10 to $8.20 (+1% to +2%) after an $8.03 close.

Marvell Technology Group Ltd. (NASDAQ: MRVL) is down 2.2% at $15.31.

Micron Technology, Inc. (NASDAQ: MU) is up 1.5% at $6.61.

NXP Semiconductors NV (NASDAQ: NXPI) is indicated up about 1% after getting a CNBC tout as a growing Apple supplier for the next generation chips.

Qualcomm Inc. (NASDAQ: QCOM) is up 2.5% at $63.41.

SanDisk Corporation (NASDAQ: SNDK) has warned twice in recent weeks but it is getting some love as well with a gain of 1.7% at $37.10.

Skyworks Solutions Inc. (NASDAQ: SWKS) is up 7% at $25.60.

TriQuint Semiconductor Inc. (NASDAQ: TQNT) is up 10% at $5.67.

When one stock goes up, everyone looks at the other plays out there that benefit too.  When Apple is so big, it leaves a lot of room for growth.

JON C. OGG

The call options were active in May if you look at the open interest but it is a trade out in the JULY-2012 $40 CALLS that really starts the interest here.  There have been more than 13,000 CALLS traded in the July expiration and the prior open interest was a mere 980 contracts.  This is representative of 1.3 million shares on a fully leveraged basis.

We would note that more than 5,500 contracts have traded at the same $40-strike price in the July PUTS but there was an open interest of 11,597 before taking today’s volume into consideration.

Another odd trading alert took place with more than 5,500 of the OCTOBER-2012 $31.00 PUTS trading hands today.  The prior open interest there was only 580 contracts in those PUT options.

SanDisk shares are up 2% at $36.64 and the 52-week trading range is $32.24 to $53.46.

JON C. OGG