UBS Cautious on Top Chip Stocks Before Earnings This Week
Maxim Integrated Products Inc. (NASDAQ: MXIM) is also Neutral rated and is expected to report in-line numbers this week. The UBS team is somewhat concerned that its Samsung wireless exposure in a broad range of Samsung mobile products, including the flagship Galaxy S5 could be a potential negative in upcoming third-quarter earnings. The company engages in designing, developing, manufacturing and marketing various linear and mixed-signal integrated circuits worldwide.
Investors receive a solid 3% dividend. The UBS price target for the stock is $31, and the consensus price objective is $36.09. Maxim closed Friday at $34.09 a share.
Qualcomm Inc. (NASDAQ: QCOM) remains the 900-pound gorilla in the wireless space, despite its slight earnings miss last quarter. While the UBS analysts only expect an in-line report this week, they feel that the company could produce 9% quarter-over-quarter gains in the fiscal fourth-quarter report from the seasonal ramp of new products, especially from Apple. They also point out that much of China’s 4G demand is expected to happen in the second half of 2014. And Qualcomm’s Systems on a Chip will go into up to 1.3 billion devices this year. This represents a consolidated growth rate of 13% to 20%. Because Qualcomm operates at such economies of scale, the company has a lot of flexibility when it comes to pricing. That means it can produce margin gains better than many competitors.
Investors are paid a 2.1% dividend. The UBS target price for Qualcomm stock, which is rated Buy at the firm, is $89. The consensus target is set at $85.61. Qualcomm closed Friday at $79.39 a share.
Texas Instruments Inc. (NASDAQ: TXN) is an old-school name that also comes in rated Neutral at UBS. Yet, the UBS analysts are very positive on the report this week from the venerable chip giant. They expect the company to post a very solid 10% quarter-over-quarter gain. In their report, the UBS analysts cite valuation as the main reason that the stock is not rated Buy, as the report for the quarter should be outstanding.
Investors are paid a solid 2.5% dividend. The UBS price target for the stock is $49, and the consensus target is posted at $49.22. Shares closed Friday a$48.82.
With many of these top chip stocks rated Neutral, the UBS team is clearly seeing the stocks as fully valued. With prospects for many of these companies reasonably bright looking forward, investors should look for pullbacks in price to slowly scale in some capital.