Semi Cap Equip: Barclays Upgrades VSEA, KLAC, NVLS

The semiconductor capital equipment sector is showing strength today, following a bullish note this morning on the group by Barclays Capital analyst C.J. Muse.

Muse writes in a research note that the Semicon West trade show at the Moscone Center in San Francisco next week should spark renewed interest in the group - and that investors should increase their exposure. He expects “growing visibility” to double digit sequential order growth through 2009, leading to “strong earnings revisions ahead.” Muse expects “growing confidence” in increased spending by Samsung and Hynix will provide a “major catalyst” for the shares.

Muse expects to hear “cautiously optimistic views” from company execs next week, “with focused on renewed customer dialogue and expectations that business bottomed in Q1 with outlook from here incrementally better.”

Ratings changes:

• Varian Semiconductor (VSEA): Upgraded to Overweight from Equal Weight. “Surprisingly, will likely reach near break-even in Q3.”


• KLA Tencor (KLAC): Upgraded to Overweight from Equal Weight. “Expect a strong bear and raise.”


• Novellus (NVLS): Upgraded to Equal Weight from Underweight. “See shares working [near-term] given strong upside to Q3? guidance.

He also continues to recommend Cymer (CYMI), Teradyne (TER), Tessera (TSRA) and Verigy (VRGY).

In today’s trading:

• VSEA is up 97 cents, or 4.1%, to $24.71.


• KLAC is up $1, or 4%, to $26.13.


• NVLS is up 84 cents, or 4.9%, to $17.84.


• CYMI is up 72 cents, or 2.6%, to $28.34.


• TER is up 20 cents, or 3.3%, to $6.27.


• TSRA is up 67 cents, or 2.8%, to $24.71.


• VRGY is off $1.14, or 10.1%, to $10.11. (See last night’s post for more on VRGY.)