PLAB Upped from Sell to Hold

Management at Photronics, Inc. (PLAB - Snapshot Report) has dropped breakeven to $101 million from $113 million in mid-2008, and expects it to improve further.

Photronics management is encouraged by several opportunities at the leading edge with expanded presence in FPD masks and increased penetration and capacity to support 90 nanometer and below customers. That said, the outlook in space is murky.

We feel the firm will trade at current valuation metrics for the near future. We set a price target of $2.00.

The Semiconductor Industry Association (SIA) projects 2009 sales at $246.7 billion, a decline of -5.6% from 2008. The PC market is expected to generate the largest chunk of sales in 2009 with a 39% share, followed by consumer at 21%, cell phones and mobile devices at 19%, industrial/military 8%, automotive 7%, and wired communications 6%. Cell phone units are expected to be down -6.4%, PC units down -5%, PMP/MP3 units up 8% and digital still camera units up 7%.

Semiconductor capital equipment spending is also expected to be down in 2008 and 2009. Visibility remains decidedly cloudy, with any kind of growth likely to come through diversification of the product line and geographical expansion. The semiconductor market is expected to resume growth in 2010.

Read the full analyst report on PLAB.