Raymond James starts semicap equipment sector with positive view

Raymond James initiated coverage of the semiconductor capital equipment sector, saying the cyclical correction is largely behind the group and that risk/rewards are attractive despite year-to-date stock moves. The firm expects fab equipment spending to bottom in the second half of this year and sees a number of growth drivers for the group. Valuations “do not appear stretched, and a case can also be made for multiple expansion given higher trough earnings,” the analyst tells investors in a research note. The firm initiated ASML (ASML) with a Strong Buy rating and $725 price target. It believes the recent share pullback “presents an excellent entry” given the company’s monopolistic position in extreme ultraviolet technology, double-digit growth potential, and multiyear visibility. Raymond James also put Outperform ratings on Applied Materials (AMAT), Lam Research (LRCX) and KLA Corp. (KLAC).