Citi Analyst: We are entering the worst downturn in a decade

After a rough few months for semiconductor stocks, one Wall Street analyst expects the pain to continue, predicting on Tuesday that

–We are entering the worst semiconductor downturn in a decade, Citi Research analyst Christopher Danley wrote in a note on Tuesday.

Danley also writes that this earnings season has been below consensus estimates for the semiconductor sector’s earnings for the first time since the pandemic began. While many analysts blame the sharp decline in PC and smartphone sales, they are nonetheless optimistic about the marked increase in the auto and manufacturing sectors in the semi-old industry, according to Bloomberg.

However, Danley was not positive, stating that he believes that the better sectors are showing signs of decline in the future.

“We are seeing the first signs of a correction in the automotive and industrial markets, and we continue to believe we are entering the worst decline in semiconductors in over a decade given the current slump and inventory buildup,” said the Citi Research analyst. .

Danley points to canceling orders for automotive and industrial semiconductors from companies like Micron Technology and Analog Devices, both of which have lost a lot in the past year.

– Danley said we expect more companies to announce cancellations from the end markets of both the automotive and industrial markets as production capacity is now increasing and demand weakens.

Furthermore, Danley wrote that they maintain their belief that every company will correct, and they expect the SOX semiconductor index to continue its downward curve and fall another 25 percent.

Danley points to the PHLX Semiconductor Index (SOX) which is already approaching its worst decline in 14 years. For the year, the index is down 32 percent, and if it remains unchanged, it will be the worst drop since 2008, when the index fell 48 percent in a year, according to Bloomberg.