By Sam Boughedda
In a note to clients on semiconductor stocks on Friday, Citi analysts told investors the firm expects auto to roll over next, then data center in 1H23.
Citi remains cautious on the sector as consensus estimates "declined again during earnings season as the PC/handset weakness extended to the industrial end market as previewed."
"We expect the automotive end market to roll over next followed by the data center end market during 1H23 and we expect the SOX index to hit new lows driven by further EPS cuts," wrote the analysts.
The analysts confirmed the firm's top pick remains ADI due to Citi's cautious stance, while their favorite stocks to own coming out of the downturn remain Micron Technology (NASDAQ:MU), Advanced Micro Devices (NASDAQ:AMD), ON Semiconductor (NASDAQ:ON), and GlobalFoundries (NASDAQ:GFS).
"Lead times are declining in the automotive space and we believe the auto end market will see a correction soon and would note both ON and NXP guided 4Q22 revenue from the automotive end market to be sub-seasonal," the analysts added. "Our checks in the data center food chain suggest orders for semis should remain strong through C22 then correct in 1H23."