Bank of America Merrill Lynch’s Tal Liani slips from second place after two years, to No. 3; he repeats in second place in Data Networking & Wireline Equipment. Tracking 17 stocks in this group, with plans to add names by year-end, Liani believes the sector is nearing the peak of its cycle so rates it underperform. Although it advanced 26 percent and beat the S&P 500 by 9.3 percentage points in the 12 months through August, it trailed the broad market by 5.2 percentage points in the first eight months of this year. “Most handset vendors do not generate any profits,” Liani notes, “and the value has shifted from handset design and manufacturing into software and applications — two areas that are mostly controlled by two companies, Google and Apple.” The market for handsets has become saturated, he adds, leaving even industry leaders in a position where they have to “reinvent the wheel again and again, suffering from some decline in demand versus previous expectations.” The analyst does like Qualcomm, however, and rates the San Diego–based supplier of chipsets used in Android handsets a buy based on near-term upside in the semiconductors sector. — Pam Baker |
Google San Diego Pam Baker Qualcomm Tal Liani Bank
