On January 12, 2013, Zacks Investment Research downgraded Altera Corp. to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Altera has witnessed sharp downward estimate revisions after its modest third quarter 2012 results and lowering of revenue guidance for the fourth quarter. The shares of this Logic device manufacturer have been range bound since October. Additionally, given its expected revenue decline in the upcoming quarter, the shares have downside risk.
On October 23, 2012, Altera reported third quarter earnings per share of 49 cents, ahead of the Zacks Consensus Estimate by 6.5% but down 14.0% from the year-ago quarter. Revenues dropped 5.0% from the year-ago quarter.
On December 4, 2012, the company announced that it expects revenue for the fourth quarter to decline 8.0%–10.0% sequentially (previously 6.0%-10.0%). The company believes that weak sales of legacy products will likely offset the increasing sales of new products. The company also expects operating expenses to grow sequentially.
Above all, Gartner’s prediction for a 3.0% decline in the semiconductor market in 2012 and dwindling PC market are concerns.
The Zacks Consensus Estimate for 2012 decreased 0.6% to $1.73 per share over the last 60 days. For 2013, most of the estimates were lowered over the last 60 days, which pulled down the Zacks Consensus Estimate by 5.9% to $1.76 per share. Over the last 90 days, estimates for 2012 and 2013 dropped 3.4% and 16.2%, respectively.
Altera operates in the semiconductor industry and is a key player in the programmable logic devices (PLDs) market. Altera shares its PLD space with Xilinx Inc. (XLNX - Free Report) and the two companies jointly hold roughly 85.0% market share.
Other Stocks to Consider
Not all semiconductor stocks are performing as poorly as Altera. We recommend Cirrus Logic (CRUS - Free Report) , which has a Zacks Rank #1 (Strong Buy). Omnivision Technologies and MEMC Electronic Materials , which have a Zacks Rank #2 (Buy) are also looking good at present.