Shares of chip maker Linear Technology (LLTC) are up $3.22, or almost 11%, at $33.09 after the company last night reported better-than-expected Q3 revenue and stronger projected quarter-over-quarter sales growth this quarter than the Street had expected.
Linear’s report is helping to lift chip peers, with some of today’s biggest market gainers including Texas Instruments (TXN), up $2.30, or over 7%, at $33.36, Analog Devices (ADI) up $2.07, or 5.6%, at $39.11, Xilinx (XLNX) up $1.67, or 5%, at $35.02, and Altera (ALTR) up $3.17, or almost 9%, at $40.23, to name just a handful of the big gainers.
The shares have only added to gains following a�its conference call this morning, at 11:30 am, Eastern, with analysts.
CFO Paul Coghlan told the assembled that “generally throughout this quarter customers continued to be very cautious and concerned over general global macroeconomic conditions.”
However, he reiterated that new orders are giving the company hope that the business has turned the corner (“inflection point” is the jargon here) amidst a broad industry correction. Said Coghlan, ” Our bookings in December were substantially better than the month of November; so far in January our daily bookings rate is exceeding our December actual rate and also exceeding our original estimates for January.”
Digging deeper into the regional issues, Coghlan remarked,
Europe still seems burdened by its sovereign debt issues. On the positive side, the US appears to be growing again. Recent economic news out of China is good and is expected to grow its economy this year, but not as robustly as in recent years. Weighing all these factors, customers, although conscious, appear to want to stop reducing inventories and invest modestly in demand
Analysts on the call pressed Coghlan on how much of the March outlook was coming from inventory replenishment. Coghlan responded that “I don’t think a lot of our growth in the March quarter is going to be a result of changing and ending inventory balances at distributors comparing the end of December to the end of March.”
Gohlan said the growth is spread across several of its customers’ industries, and that the company is seeing “good opportunities” in the industrial segment, but also in communications, computer, wireless infrastructure, and automotive markets.
The analysts had already compelled some instant analysis this morning, before the call took place.
Jefferies & Co.’s Mark Lipacis noted that this is “the first positive revision for a larger cap semiconductor stock in a while, and we view it as consistent with our view that semis should benefit from a restock in 1H12.”
Lipacis maintains a Hold rating on Linear shares.
UBS’s Uche Orji, who has a Buy rating on Linear, wrote that “fundamentals for the company and the analog sector have bottomed, and revenue should start growing driven by restocking and demand.”
Caris & Co.’s Craig Ellis, who has an “Average” rating on the stock, writes that the bears could claim Linear had a low bar to clear because it had “weak” revenue growth in 2011, compared to peers.
Nevertheless, writes Ellis, “it’s clear the case for a cyclical recovery has picked up support from one of Analog’s longest-tenured and most respected management teams, a plus for investor thinking on underlying fundamentals, a turn in the EPS revision cycle, and near-tem sector stock upside.”
Ellis recommends TI and , on which he maintains an “Above Average” rating, and Semtech (SMTC), and ADI and ON Semiconductor (ONNN), on which he maintains Buy ratings.
Update: Analysts have started to offer their views post-conference call. Piper Jaffray’s Gus Richard reiterates an Overweight rating, while raising his price target to $39 from $36. Richard expects “a strong improvement in demand over the next couple of quarters,” based on several factors, including a recovery in Japan’s auto business and “new auto programs,” a recovery of the chip industry from “overly depressed sales levels,” and “the beginnings of a recovery in wireless infrastructure.”
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