CY stock fell more than 13% last week
The stock of semiconductor (SMH) company Cypress Semiconductor (CY) fell 12.6% in the week ended December 1, 2017, to close at $15.19. The stock is now trading 52% above its 52-week low of $65.79 and 14% below its 52-week high of $116.89. CY has generated returns of 42% in the trailing 12-month period and 32% since the start of 2017.
Cypress Semiconductor stock fell as investment bank Morgan Stanley (MS) lowered its rating on chip stocks. Morgan Stanley believes that lower memory prices will negatively impact companies’ profit margins over the next year. Morgan Stanley has advised investors to reduce exposure to NAND (non-AND) manufacturers who have benefited from rising component prices in the last 18 months.
Analyst Shawn Kim expects pricing tailwinds to subside and stated, “Given our view of the cycle, we cannot recommend the sector until the market recognizes mounting pressure on NAND prices and slowing logic chip growth momentum in the near term.…This reflects our negative view of prospects for the global memory industry, which is currently at a peak.”
Western Digital and Samsung downgraded
Morgan Stanley downgraded the stocks of Western Digital (WDC), Samsung (SSNLF), and Taiwan Semiconductor to “equal weight” from “overweight.” According to Kim, previous memory cycles have shown that investors should exit stocks three to six months before prices peak. While flash memory prices have started to decline, Kim has estimated that DRAM (dynamic random-access memory) memory prices will move higher through mid-2018.