UBS Cautious on Top Chip Stocks Before Earnings This Week

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With another huge week of earnings ready to hit the tape, many analysts and investors are trying to handicap not only how the earnings for the quarter will be, but also the outlook for the second half of the year. With Apple Inc. (NASDAQ: AAPL) expected to launch as many as four devices in the second half of the year, including the highly anticipated iPhone 6, the top chip names could be poised to overachieve.

A new report from the chip analysts at UBS offers their thoughts on top chip stocks that will put out their second-quarter earnings reports this week. With some of the biggest companies in the industry set to report numbers, the UBS team is giving investors insight into what may happen.

Broadcom Corp. (NASDAQ: BRCM) disappointed with its first-quarter earnings results as the company struggled in its mobile and wireless business. The UBS team thinks that the second-quarter numbers will come in better. Given that Broadcom will either sell or shut down its mobile baseband division by year end, UBS also believes any color on future sources of growth will be in greater focus. They caution if Samsung starts losing smartphone share, third-quarter numbers could be light.

Investors are paid a 1.3% dividend. The UBS price target for the stock, which is rated Neutral, is $35. The Thomson/First Call consensus price target is higher at $29.31. Broadcom closed Friday at $38.74 a share.

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Linear Technology Corp. (NASDAQ: LLTC) is also rated Neutral at UBS and has a strong 42% industrial end market exposure, which may help to boost the second-quarter report. The UBS analysts expect in-line results, and the outlook on improving macro trends is supportive for modest industrial and automotive growth rates. The company produces power management, data conversion, signal conditioning, radio frequency and interface integrated circuits, as well as µModule subsystems and wireless sensor network products.

Linear Technology investors receive a 2.3% dividend. UBS has a $46 price target, and the consensus target for the stock is $46.39. The stock closed Friday at $47.21.