Barclays Previews Semis: Broadcom, Skyworks Favored, While AMD Is Due For A Fall

The semiconductor stocks are the best-performing S&P 500 sector — and Barclays analyst Blayne Curtis said he expects to see a seventh consecutive period of positive earnings growth from the group.

The most interesting segment in the sector is Apple Inc. (NASDAQ: AAPL)'s supply chain, which has been underperforming other stocks in the space, Curtis said. (See Curtis' track record here.) 

Broadcom Ltd (NASDAQ: AVGO) and Skyworks Solutions Inc (NASDAQ: SWKS) have upside potential, the analyst said. Barclays upgraded both stocks to Overweight, with a $300 price target for Broadcom and $120 price target for Skyworks. There's no reason for concern over Apple's suppliers, as they have always been more conservative than Apple analysts, Curtis said. Any initial supply constraints will spill into the first quarter, leading to better results for the next year, the analyst said. 

The performance of iPhone X is important for both Broadcom and Skyworks, according to Barclays. Broadcom has the best growth and profitability and is trading at a compelling valuation, the analyst said; he expects a 50 percent dividend increase, which would give the stock a superior yield at a 25- to 50- percent valuation discount to other analog names.

Skyworks will likely report conservative guidance as they wait for iPhone X data, Curtis said. Apple risks are priced in given the under performance of the stock, the analyst said. 

Barclays has an Underweight on Advanced Micro Devices, Inc. (NASDAQ: AMD) with a price target of $10. The research firm projects the company will beat expectations due to a temporary cryptocurrency tailwind. Mass adoption of the company's Epyc server chip is unlikely due to first generation silicon and latency issues between cores and memory, Curtis said. 

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