Boston, MA 10/13/2014 (wallstreetpr) – The semiconductor companies were in a deep red last week and Freescale Semiconductor Ltd (NYSE:FSL) too felt the heat. The shares of the company dived down by more than 10% to $16.01 on the last trading session. The weakness in the sector came after Microchip Technology Inc. (NASDAQ:MCHP) raised the alarm of an impending downturn in the industry.
Dampens Outlook
The company trimmed its revenue forecast, while its CEO Steve Sanghi held the deteriorating loss of revenues in China as the culprit for the missed revenues. Generally, September is considered as a strong growth month for the industry. Also, Sanghi warned that the industry is close to witnessing a correction as he believes that the first leg has already started. Sanghi’s words dampned the whole industry outlook leading to a sharp fall in the stocks of semiconductor businesses including Freescale Semiconductor Ltd (NYSE:FSL).
In fact, Microchip Technology Inc. (NASDAQ:MCHP) itself has been slapped by a rating cut from Needham & Co. The research firm’s analyst, Rajvindra Gill, noted Sanghi’s tone points out that “the space is in a precarious state”. Joining Gill in his concerns is Pacific Crest Equities analyst Michael McConnell, who, though maintain a neutral rating on the firm said that the clouds are hovering over the semiconductor business. McConnell highlighted that there is no denying about Microchip Technology Inc. (NASDAQ:MCHP) being a strong indicator of the industry’s condition.
Deciphering The Meaning
Meanwhile, Citigroup’s semiconductor analysts David Phipps and Ashish Nair slashed their forecasts for Freescale Semiconductor Ltd (NYSE:FSL). They explained that a downturn in the space means reduced demand for inventory, which is expected to continue for the next two to three quarters. Thus, the companies are expected to feel the pinch in their sales and margins. At the same time, the rating cuts from research firms indicate that Sanghi’s words are believed to be true for sure.
