Semiconductor Manufacturing International Corp.  (SMI) Trade Now »     Rate SMI  -  Discuss SMI  -  Add to Watch List        

Reversing a “sell-on-the-news” trend in the contract semiconductor market, Taiwan Semiconductor Manufacturing (TSM) this morning announced results for its Q2 that beat analysts’ estimates for sales and profit, announced a huge jump in projected capital expenditures, and the stock actually rose.

There goes the rally in contract chip makers. Shanghai, China’s Semiconductor Manufacturing International (SMI) and Taiwan’s United Microelectronics (UMC) both this morning beat profit and sales estimates for their most recent quarters and forecast above consensus, but both saw shares punished nevertheless.

SMI shares fell 21 cents, or 7.4%, to $2.64; UMC fell 15 cents, or 4.6%, to $3.15.

After a 61% rise in UMC stock this year and a 26 rise in SMI stock, I guess folks are selling on the news.

Bank of America/Merrill Lynch analyst Daniel Helyar and his colleagues who cover the semiconductor sector today turned bullish on the contract chip fabs, triggering an impressive rally in the group.

The bullish stance is a switch from a more bearish position Merrill took in early June.

Helyar writes in a research note today that there are now signs that customer inventory risk is diminishing, and asserts that demand prospects for the second half and for 2010 appear to be improving. He revised up his 2010 growth forecast for the semiconductor contract manufacturing sector to 23%, from 15%.

Bank of America/Merrill Lynch analyst Daniel Helyar this morning turned cautious on the semiconductor contract manufacturing sector, down grading most of the stocks in the group given elevated valuations and weak near-term cyclical indicators.

The firm made the following downgrades:

Merrill Lynch analyst Daniel Heyler this morning turned bullish on the contract semiconductor manufacturing sector, asserting that a bottom to the current cycle is in sight. In a research note, Heyler asserts that inventories should bottom in Q2, with a modest second half recovery likely in the second half and a strong rebound in demand in 2010. He asserts that valuations in the sector are on average 45% below his mid-cycle fair value estimates. He thinks the stock should reflect a 2010 recovery within 12 months.