J.P. Morgan Cuts Novellus Systems to Neutral
J.P. Morgan downgraded Novellus Systems (NVLS ) to neutral from overweight.
Analyst Jay Deahna says the chemical mechanical planarization (CMP) market share gain story is not materializing as he expected; he's also incrementally concerned about chemical vapor deposition (CVD) share. He says loss of share in the core plasma enhanced (PE) CVD business in "low k" applications is his largest concern; physical vapor deposition (PVD) market share growth is happening at a slower than expected pace and at sub-par margins.
Deahna notes Novellus' valuation is at the upper end of the large-cap front-end equipment spectrum at 18.7 times his 2006 earnings per share estimate vs. the group's 17.0 average.