), KLA-Tencor Corp. (KLAC
), Lam Research (LRCX
), LTX Corp. (LTXX
), Novellus Systems (NVLS
), Teradyne Inc. (TER
), and Varian Semiconductor Equipment Associates (VSEA
) to outperform from strong buy.
Analyst Steven Pelayo says while fundamentals are clearly improving, he is "easing off the gas." Equipment stocks in his universe have approximately doubled off the bottom since early October, driving through his target prices twice, he says. It suggests a recovery similar to the 1999 recovery, but this time the end-markets are not as robust, he says. He believes the market will have to see more solid signs of end-market demand on the rise in order for continued momentum. He thinks valuations are a bit ahead of themselves this early in cycle, he says.