2 Chip Stocks Downgraded Amid Semiconductor Sell-Off

WDC and SWKS both were downgraded this morning

by Patrick Martin

Published on Nov 20, 2018 at 10:25 AM

Amid the latest semiconductor sell-off, analysts have been quick to chime in with bear notes. Two names under particular pressure today due to downgrades are Western Digital Corp (NASDAQ:WDC) and Skyworks Solutions Inc (NASDAQ:SWKS).

Looking at Western Digital first, Susquehanna downgraded the stock to "neutral" from "positive," while slashing its price target to $44 from $120. The analyst in coverage says they have lost confidence in the company's NAND business, especially compared to sector peers.

In response, WDC is down 4.8% to trade at $42.95 at last check, but remains slightly off its Oct. 30 two-year low of $40.58. The shares have carved out a channel of lower lows and highs since mid May, with rebound attempts thwarted by their 30-day moving average. Overall, the security has now give back 46% in 2018. 

In the options pits, calls have been the preference, though amid limited absolute volume. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows 4,869 calls were bought to open in the last 10 days, compared to just 2,187 puts. Continued technical underperformance could lead to an unwinding of these bullish bets.

Turning to Skyworks Solutions, the stock is down 2.4% to trade at $69.07 and earlier tapped a new two-year low of $68.58, after BofA Merrill Lynch downgraded chip name to "underperform" from "neutral." Earlier this month, SWKS gapped lower in the wake of a subpar quarterly report, and has now wrung up a yearly deficit of 25%. 

Many analysts are still in the bullish camp. Of the 22 brokerages covering SWKS, 13 rate it a "buy" or "strong buy," with only one sell on the books. Furthermore, the security's consensus 12-month price target of $100.56 is a 42% premium to its current perch.  

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