The Zacks Analyst Blog Highlights: Intel, Texas Instruments, Micron, Microchip and Apple

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Oct 14, 2014, 10:28 ET

CHICAGO, Oct. 14, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Intel (Nasdaq:INTC-Free Report), Texas Instruments (Nasdaq:TXN-Free Report), Micron (Nasdaq:MU-Free Report), Microchip (Nasdaq:MCHP-Free Report) and Apple (Nasdaq:AAPL-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday's Analyst Blog:

Technology Stock Roundup

Chip stocks like Intel (Nasdaq:INTC-Free Report), Texas Instruments (Nasdaq:TXN-Free Report) and Micron (Nasdaq:MU-Free Report) took a tumble last week as Microchip (Nasdaq:MCHP-Free Report) warned of an inventory correction in the industry; GT Advanced Technology filed for bankruptcy.

Inventory Concerns Send Semi Stocks Crashing

Microchip Technology led semiconductor stocks down as its CEO warned investors of an inventory correction. Semiconductor companies and investors in these companies have been very much on edge about a fallback in demand.

After the last downturn, companies have been very conservative about building inventory and placing orders, and channel inventories have been lean for the most part. A few companies had just started talking about some channel filling this year, but it may be too soon if Microchip CEO Steve Sanghi is to be believed.

The warning shouldn't have had such a broad impact, but many semiconductor bellwethers had swooning share prices following the CEO comments. Some of the worst affected were Microchip itself, Intel, Texas Instruments, STMicroelectronics, Micron, Analog Devices and Freescale.

This could be because of Microchip's broad exposure to different markets using semiconductors. Moreover, the weakness was attributed particularly to China and a lot of these companies have been pinning their hopes on growth in the region. Sanghi also said that companies reporting on a sell-in basis may not feel the effect immediately.

Apple "Surprised" at GTAT Bankruptcy

GT Advanced Technologies is paying the price for placing all its eggs in one basket. But the company probably can't be blamed because of the funding required to develop sapphire technology. Apple (Nasdaq:AAPL-Free Report) agreed to pay $578 million for the purpose last year, of which $439 million was paid as a first installment. The remaining $139 million was to be paid only if GTAT met certain criteria, which aren't public.

GTAT says the terms of the agreement were "burdensome and oppressive." First, it filed for Chapter 11 protection, then it requested the court permission to wind down the sapphire crystal operations in Arizona and keep the terms of its agreement with Apple undisclosed because it could be required to pay $50 million in damages per disclosure. After that, it filed another document asking the court to end its agreement with Apple because it was an unnecessary drain on its resources.

Apple did two things that could have put the final nail in GTAT's coffin. First, it rescinded the contract without paying the $139 million. Second, it didn't use what GTAT was making in its devices, since the contract didn't impose any obligations on it to buy although GTAT was obligated to produce and meet its quality and volume requirements.

The nature of Apple devices necessitates huge volumes, and Apple wouldn't be able to use the material if volume targets weren't reached. Apple said that it was focused on preserving jobs in Arizona and would continue to work with state and local officials as it considered its next steps.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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