wellesenterprises/iStock Editorial via Getty Images
wellesenterprises/iStock Editorial via Getty Images
Investment firm Citi cut its 2022 and 2023 earnings estimates for Texas Instruments (NASDAQ:TXN), NXP Semiconductors (NASDAQ:NXPI) and Microchip Technology (NASDAQ:MCHP) on Tuesday, as the firm said orders are being pushed out and cancellations are happening.
In a note to clients, analyst Atif Malik said that weakening demand, especially in Europe, along with high inventory, is causing the downfall and the push outs that Analog Devices (ADI) saw in July are now starting to hit other companies.
“We expect NXP Semiconductor (NXPI) and [Texas Instruments] will both report weakness in bookings and we reiterate our belief that this is just the beginning of the downturn and every company/every end market will feel it,” Malik wrote in the note, adding that Microchip (MCHP) may feel the weakness last as it has the longest lead times.
Malik added that Analog Devices (ADI) is still the firm’s top pick, citing its “defensive nature,” but cautioned that the Philadelphia Semiconductor Index is likely to keep making new lows “as the downturn gains steam and estimates get cut.”
Malik tweaked his 2022 earnings estimates for Microchip (MCHP) for the company to earn $5.50 per share this year, up from a previous view of $5.43. But next year, the company is expected to earn $4.06 per share, down from a previous view of $5.51 per share.
For NXP (NXPI), Malik now expects the company to earn $9.49 per share in 2023, down from a prior estimate of $12.48 per share. Malik expects Texas Instruments (TXN) to earn $7.72 in 2023, up slightly from a prior estimate of $7.70 per share.
There are also expectations that the weakness should hit two of the strongest areas in semiconductors — automotive and data center — next, with push outs and cancellations coming to those markets “within 1-2 quarters.”
Malik added there are three signs that could point to a bottom in the first half of 2023: downside in estimates, cuts to capital spending and a “close to trough valuation” on the new numbers.
Late last month, Bank of America said Texas Instruments (TXN), Analog Devices (ADI) and NXP Semiconductor (NXPI) were in the “low risk bucket” on worries over weakening iPhone sales.