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UBS Upgrades 4 Chip Makers to 'Buy' from 'Neutral'

Monday, 19 Sep 2011 | 4:24 PM ET

UBS raised its sector view on a handful of semiconductor stocks in a report on Monday, lifting its rating to 'positive' from 'neutral' and upgraded a handful of stocks within the sector to 'buy' from 'neutral.'

The report noted that chip maker "balance sheets are much stronger than in all previous downturns, supporting a record dividend yield of 2.5 percent, share buybacks, and acquisitions, all of which could help the sector's performance."

In the semiconductors sector, UBS upgraded these four stocks to 'buy' ratings.

Texas Instruments

The price target for Texas Instruments was raised to $32 a share from $28 a hare. Although UBS analysts think share buybacks will slow, they believe the company will use dividends to return cash to shareholders given strong cash flow.

While it keeps the near-term estimates unchanged, the report raises the full-year 2012 estimates for the company. UBS analysts increased the company's expected earnings per share to $2.30 from $2.12, and raised its expected revenue to $13.8 billion from $13.1 billion.

Analog Devices

In the report, the price target for Analog Devices was increased to $38 a share from $32 a share. UBS analysts also raised its 2012 estimates for earnings per share to $2.76 from $2.71, and revenue to $3.09 billion from $3.06 billion.

Although analysts noted that the industrial demand outlook remained unclear, they were seeing improvements in communications and in autos, according to the report.

Linear Technology

UBS analysts cited Linear Technology's strong free cash flow and a bottoming of key lead indicators as support for its upgrade of the company's stock to 'buy' from 'neutral.'

In the report, analysts also raised the company's price target to $34 a share from $31 a share, the 2012 earnings per share to $2.05 from $2. It also increased its 2012 revenue estimate to $1.384 billion from $1.349 billion.

Maxim Integrated Products

UBS analysts cited Maxim Integrated Products' "strong balance sheet" and "strong free cash flow" for raising its price target on the company to $28 a share from $23 a share. Analysts also raised its 2013 estimates for revenue to $2.671 billion from $2.576 billion, and earnings per share to $1.89 from $1.78.

Other Views:

A Stifel Nicolaus Analyst Weighs in Semiconductors

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Disclosures:

UBS does and seeks to do businesses with companies covered in its research reports.

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