Wall Street analysts who cover semiconductor stocks are bracing for bad news this earnings season in the wake of tariffs and trade disruptions.
Some analysts are comparing the impact of the Trump administration's tariff war to such market shocks as the Covid pandemic and the global financial crisis.
Evercore ISI analyst Mark Lipacis on Monday lowered his sales and earnings estimates for makers of analog and microcontroller unit (MCU) chips. He also cut his price targets on nine semiconductor stocks, including Analog Devices, Microchip Technology, NXP Semiconductors and Texas Instruments.
"We lower our estimates for the analog/MCU group broadly following our first-quarter channel checks, which highlighted a material decline in bookings activity starting late March," he said in a client note.
Lipacis said he is applying lessons learned from the first quarter after Covid (Q1 2020) and the global financial crisis (Q3 2008) in his estimates for the first quarter after the Trump tariffs.
"The Covid and GFC case studies inform our new 2025 and 2026 revenue and EPS estimates," he said.
He expects analog and MCU chipmakers to provide second-quarter revenue guidance that is 5% to 15% below seasonal. Plus, chipmakers will focus on lowering their inventories, factory utilization rates and capex, he said. Further, he sees Wall Street broadly lowering estimates for this year and next.
UBS analyst Timothy Arcuri said he has prepared for Q1 earnings season by reviewing the performance of semiconductor stocks during recessionary periods.
"Amid mounting fears of a recession, we have been asked by investors many times how various stocks typically perform during recessions," Arcuri said in a client note Monday.
"The drawdown in semiconductor stocks has now breached anything we have seen in the past 20 years in terms of both duration and magnitude," he said.
Semiconductor Stocks Get Price-Target Cuts
On Tuesday, Barclays analyst Tom O'Malley cut his price targets on 28 semiconductor stocks. He also downgraded Texas Instruments stock to underweight, or sell, and slashed his price target to 125 from 180.
Like other analysts, O'Malley is comparing the current market to other major corrections in the semiconductor space, including the Covid pandemic, global financial crisis and the dot-com crash (March 2000).
"We thought it would be worth looking at the last several major corrections in the semi space on a P/E (price-to-earnings ratio) basis," O'Malley said in a client note. "We found that on average during the Tech Bubble in 2000-2002 compute names corrected -82%, during the Financial Crisis (2007-2009) they corrected -75% and during the Pandemic they corrected -77%. The most recent drawback on AI capex concerns and tariffs has resulted in a -73% pullback. To oversimplify, it appears much of the current pullback with the large compute names, if using historical frameworks for resets, is already in stocks."
The Trump tariffs and U.S.-China trade war likely will result in higher prices and lower demand for electronics goods like smartphones and PCs, he said.
KeyBanc Capital Markets analyst John Vinh said he sees further downside for semiconductor stocks if the economy enters a recession.
"In a recessionary scenario, we see 30%-40% further downside risk to SOXX (Philadelphia semiconductor index) valuations looking at historical averages, which incorporates the last two recessions," he said in a client note Wednesday.
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