Lam Research (LRCX) and Teradyne (TER) have been chosen as “buy”-rated stocks by Vishal Shah, Managing Director & Senior Analyst at Deutsche Bank Securities Inc. He says these two names offer investors a great valuation for investors with a longer-term horizon, and also good longer-term fundamental support.
Shah says Lam Research has been historically considered a play on memory spending, and although spending is currently weaker than expected, Shay says the “key areas of growth for NAND will be penetration on all the other — the growth of SSD, solid state drives, in both PCs and enterprise. And as that happens in 2014 and beyond, we expect NAND spending to come back sharply from sometime in 2013.”
“The other thing that’s helping actually to some extent from the memory companies is capex discipline by some of the key chipmakers, like Samsung (KRX:005930) and SanDisk (SNDK). We think that as the supply/demand comes to somewhat of a balance in 2013, some of these spenders are going to start adding more capacity as far as the growth of smartphones and tablets continues because these are some of the other drivers for NAND,” Shah said.
Regarding Teradyne, he says that although TER‘s business has been considered to be commoditized and with low returns, the company’s performance, business model change and valuation in light of the current fundamentals make the stock look attractive.
“[TER] also has recently bought this other — is buying this test company called LitePoint. That business itself is worth at least $7 in our view, and the combined business has potential to be in the low 20s even on a normalized basis. So we like these opportunities now, and those are the two names that I will recommend,” Shah said.
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