Weekly Semiconductor Update – AMD, CREE, INTC, NVDA, TXN

Semiconductor stocks have been one of the top performing sectors in 2014, significantly outperforming the S&P 500 index year-to-date (up 17% versus 6%). The Semiconductor Industry Association reported that, at $28.1 billion, the global semiconductor sales in July witnessed an increase of 10% over the prior year, the highest monthly posting ever. August data should be released soon.  The semiconductor industry saw month-over-month growth across all regions and product categories. Gartner has just updated its forecast and now expects the semiconductor market is expected to grow 7.2% in 2014, though brokerage and other analysts have estimates ranging from 8% to 12%.

Below is a weekly update for some of the technology companies that Trefis covers.

See Our Complete Analysis for These Companies Here

AMD

AMD (NYSE:AMD) made the first public demonstration of ARM-based  AMD A-Series processor optimized for Hadoop environments and discussed Oracle’s support for AMD’s 64-bit ARM server architecture, last week. The company also demonstrated the first network function virtualization (NFV) solution on its 64-bit ARM-based SoC and announced that the is now sampling to AMD’s embedded customers. (Read Press Releases)

The AMD stock was down approximately 5% last week. Our valuation of $4.17 is now over 20% above the current market price. The company’s current market cap is around $2.6 billion. We forecast AMD’s 2014 revenue to increase to $5.4 billion and net income to turn positive by year end. Our GAAP and non-GAAP diluted EPS estimates stand at $0.15 and $0.37, respectively.

CREE

Leading LED manufacturer, Cree (NASDAQ:CREE) made a series of announcements last week. It introduced the industry’s first silicon-carbide (SiC) 1.7-kV power module, set new efficiency standards with the launch of ZR High-Efficacy (HE) LED troffer, and earned the U.S. Department of Defense manufacturing readiness level 8 designation. (Read Press Releases)

Cree’s stock declined by approximately 12% after the company announced its preliminary results for Q1 2015. (Read: Cree’s Stock Price Declines By 12% On Weak Q1’15 Preliminary Results) Our valuation of $58 for the company is now at a more than 60% premium to the current market price. We will update our valuation after the full Q1 2015 earnings release on October 21st. For calendar year 2014, we forecast Cree’s revenue and net income at $1.77 billion and $160 million, respectively. For fiscal year 2014 (ended June), we estimate non-GAAP diluted EPS of $1.87 as compared to the market consensus of $1.85. (Read: Here’s Why We Believe Cree Is Still Worth $58)

Intel

Leading PC chipmaker, Intel (NASDAQ:INTC) announced its new collaboration with Mitsubishi Electric to develop next-generation factory automation (FA) systems with Internet of Things (IoT) technologies and a pilot program at Intel’s back-end manufacturing facility in Malaysia. (Read Press Release) The company also announced the appointment of cybersecurity executive Christopher Young as Intel’s newest senior vice president and general manager of Intel Security.

After gaining marginally in the first 2 trading days of the week, Intel’s stock dropped down to the $33.5 level. Our valuation of $33 (market cap of $162 billion) for the company is only marginally lower than the current market price (market cap of $172 billion). We expect Intel to report revenue of around $53 billion and net income of $10 billion for 2014. We forecast non-GAAP diluted EPS of $2.18, which is in line with the market consensus of $2.17.

Nvidia

Leading graphics processors manufacturer, Nvidia (NASDAQ:NVDA) announced that its Tegra mobile processors will power the new Honda Connect in-car audio and information system in the 2015 Honda Civic, Civic Tourer and CR-V, to be launched in Europe next year. (Read Press Release) Additionally, architectural firm BLDD announced adopting Nvidia’s GRID technology to redesign its virtual IT. (Read Press Release)

Nvidia’s stock traded around $18 last week. Our price estimate of $19 for Nvidia is almost in line with the current market price. The company has a market cap of approximately $10 billion. We estimate Nvidia will report revenues of around $4.3 billion and net income in excess of $600 million this year. We forecast a non-GAAP diluted EPS of $1.42 as compared to the market consensus of $1.00.

Texas Instruments

Texas Instruments (NASDAQ:TXN) introduced a new 450-v linear controller that simplifies current regulation of high-voltage LED strings. (Read Press Release) TI’s stock price declined marginally (~3%) last week. Our valuation of $42 (~ $45 billion market cap) for TI is at a more than 10% discount to the current market price. We expect the company to report $13.1 billion and $2.6 billion in revenue this year. Our GAAP diluted EPS forecast for TI stands at $2.43 while the market consensus is at $2.41.

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