GS Upgrades/Downgrades

Conviction List

Goldman Sachs analyst Jim Covello this morning raised his rating on Lam Research
LRCX to Buy from Sell and added the stock to the firm’s Conviction Buy List.

LRCX

Covello notes that he has been negative on Lam for the last 2-3 years given its high exposure to the memory sector, but that he has now become more confortable with the stock. He says DRAM capex cuts are now mostly behind us; he says valuation is attractive at 15x normalized EPS; and he says checks in Asia find a pickup in orders in the second half is possible from Samsung and possibly Rexchip. He raised his price target on LRCX to $45, from $41.

Based on the same expectation for a rebound in orders, he also raised his rating on Advanced Energy (AEIS) to Buy form Neutral, boosting his target on the stock to $16 from $11.

AEIS

Covello made several other related calls.

He removed Verigy (VRGY) from the Goldman Conviction Buy List, though it remains Buy rated.

He downgraded both FormFactor (FORM) and Entergis (ENTG) to Neutral from Buy “to make room for LRCX and AEIS.” He says “there is better relative value” in LRCX and AEIS.

VRGY
FORM
ENTG

ASML Holding (ASML) shares are poised for a higher opening after Goldman Sachs analyst Simon Schafer raised his rating on the chip equipment company to Buy from Neutral and added the stock to the firm’s Conviction List.

“In our view, ASML now factors in the potential for a near-term gross margin miss and is significantly undervalued” compared to its peers, he writes in a research note. “While we do not foresee a material recovery in orders in 2Q, our checks underscore our confidence that 3Q and 4Q are shaping up nicely, based on incremental orders from Samsung and Rexchip/Elpida.”

ASML

NEW YORK (AP) -- A Goldman Sachs analyst upgraded the oilfield services sector to "Attractive" from "Neutral" Thursday, predicting strong profit growth due to greater drilling activity and high oil prices.
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Analyst Charles Minervino expects earnings to grow in the double digits through 2011 as high oil prices lead to more rapid rig construction, and both drilling activity and the rates oil companies pay for drilling will increase.

Minervino raised price targets throughout the sector, and said deep water drillers Transocean Inc., Diamond Offshore Drilling Inc. and Pride International Inc. will be paid higher rates. He also favors land services that do a significant amount of business in North America, including Halliburton Co., Nabors Industries Ltd. and Helmerich & Payne Inc.

He added that Schlumberger Ltd. will also benefit from higher spending and increased rig counts.