Goldman comments on semi equip this a.m.
Summary: We are incrementally more negative on the semi equipment stocks
following three days of meetings at the Goldman Sachs Asia Tech Conference.
While we remain convinced that the equipment industry has begun a cyclical
upturn and that the stocks won't peak for the cycle until the industry
reaches normalized levels of cash flow in early 2004, we believe it is
likely that the stocks will trade down 15% before resuming their upward
move. The potential catalyst for the sell-off is the equipment companies
offering conservative Q4 sequential order guidance. We now believe this is
likely based on data points we learned at the conference. Our main concern
is that several of the projects that were originally slated to make orders
in Q4 have either been pulled into Q3 (i.e. Samsung's Phase 2, Fab 12) or
pushed into Q1'04 (i.e. SMIC, STMicro, Sony, and Toshiba). Given the recent
run in the stocks and the plethora of Street upgrades that have heightened
expectations, we believe conservative Q4 order guidance will hurt the stocks
in the short term.
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