Citi On Semi Consumables: Downgrades SunEdison Semi To Sell, Cabot To Hold

Citi issued on THursday a report on the semiconductor consumables industry, highlighting Sunedison Semiconductor Ltd (NASDAQ: SEMI) and Cabot Microelectronics Corporation (NASDAQ: CCMP) amid weak smartphone and PC demand. With the weakness in the semiconductor industry, Citi sees fewer growth opportunities for the two companies.

Analyst Amanda Scarnati downgraded SunEdison Semiconductor from Neutral to Sell and lowered their price target from $10 to $3.50. She also downgraded Cabot Microelectronics from Buy to Neutral and lowered their price target from $48 to $41.

Related Link: Will China Become The Center Of Semiconductor Universe? Industry Vet Gives His Take

SunEdison Semiconductor

"Semi declined...42 percent thus far in 2016, while much of the bad news in regards to volume and pricing trends is already priced into the stock...we believe that there is further downside."

Analysts at Citi noted that Wall Street believes that SunEdison's top line will decline less than 1 percent in the December quarter with very little growth expected for the March quarter amid operational and pricing challenges. Company management has guided that softer volumes and weak seasonality may hurt SunEdison's earnings in the near term.

Cabot Microelectronics Corporation

"While CCMP will benefit from higher consumable spend due to technology transitions, weak market conditions will limit wafer starts in 2016 putting a cap on top-line growth in the low single digits."

Analysts at Citi believe that although the company recently declared a dividend to increase demand for their stock, weak macro conditions will hurt the company in 2016, with few opportunities to drive top-line growth or margin expansion in the very competitive semiconductor industry.

SunEdison Semiconductor last traded at $4.27. Cabot Microelectronics last traded at $36.21.

Image Credit: Public Domain