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The Zacks Electronics - Semiconductors industry has been benefiting from the solid adoption of laptops, notebooks, office equipment and network peripherals worldwide. The growing proliferation of AI, Machine Learning (ML) and industrial revolution 4.0 (which focuses on interconnectivity and automation) has turned out to be a boon for industry players like Broadcom, GlobalFoundries, Lattice Semiconductor and Synaptics. The growing demand for high-volume consumer electronic devices, including digital media players, smartphones, tablets, efficient packaging, machine vision solutions, and robotics, should continue to drive the industry's growth.
Industry Description
The Zacks Electronics – Semiconductors industry primarily comprises companies that provide a wide range of semiconductor technologies. Their offerings include packaging and test services, wafer cleaning, factory automation, face detection, and image-recognition capabilities to develop smart and connected products. The industry participants primarily cater to end-markets constituting consumer electronics, communications, computing, industrial and automotive.
Notably, the companies are increasing their spending on research and development in order to stay afloat in an era of technological advancements and changing industry standards. The underlined industry is experiencing solid demand for advanced electronic equipment, which is helping its participants increase their investments in cost-effective process technologies.
What's Shaping the Future of the Electronics - Semiconductors Industry?
Smart Devices Aiding Computing Demand: Smart devices need computing and learning capabilities to perform functions like face detection, image recognition and video analytics capabilities. These require high levels of processing power, speed and memory, and low power consumption. In addition, these require better graphic processors and solutions, which bode well for the industry. Graphic solutions help increase the speed of rendering images and improve image resolution as well as color definition.
Prospects Around Advanced Packaging Robust: The increasing demand for miniaturization, greater functionality, lower power consumption, and improved thermal, as well as electrical performance, are driving the demand for semiconductor packaging as well as test technologies. The growing requirement for advanced packaging is gaining traction in the semiconductor industry, which is a key catalyst for the industry participants.
Solid Adoption of Electronic Goods a Tailwind: Electronics, which aid efficiency and automation, have become ubiquitous these days. The industry has been gaining from an increased demand for electronic goods and appliances, fueled by the coronavirus-induced safety rules and precautions. The ongoing global digital wave has been driving growth of electronic components and cloud services, benefiting the industry.
Zacks Industry Rank Indicates Impressive Prospects
The Zacks Electronics - Semiconductors industry is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #95, which places it in the top 38% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry's positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group's earnings growth potential. Since Dec 31, 2021, the industry's earnings estimates for the current year have moved up 8.1%.
Before we present a few stocks that you may want to consider for your portfolio, let's look at the industry's recent stock-market performance and valuation picture.
Industry Lags S&P 500, Outperforms Sector
The Zacks Electronics - Semiconductors industry has underperformed the Zacks S&P 500 composite but surpassed the broader Zacks Computer and Technology sector over the past year.
The industry has gained 8.2% over this period compared with the S&P 500's rise of 9.3%. The broader sector has lost 2.7% in the said period.
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing electronics semiconductors stocks, the industry is currently trading at 16.59X versus the S&P 500 and the sector's 19.73X and 23.56X, respectively.
Over the past five years, the industry has traded as high as 44.87X, as low as 5.62X and recorded a median of 12.57X.
4 Electronics Semiconductor Stocks to Buy
Broadcom: The San Jose, CA-headquartered designer, developer and global supplier of a broad range of semiconductor devices is riding on the continued strength across both Semiconductor solutions and Infrastructure software verticals. The robust adoption of next-generation PON, with Wi-Fi 6 and 6C access gateways, is a major positive. An acceleration in 5G deployment, production ramp-up and an increase in radio frequency content favor prospects.
This Zacks Rank #2 (Buy) company is well-positioned to capitalize on the increased spending by telecommunication companies in modernizing infrastructure and enhancing Edge and core networks, as well as higher cloud spending by data centers. The solid demand for broadband, networking and wireless products remains another tailwind.
Broadcom has returned 24.2% in the past year. The Zacks Consensus Estimate for the company's fiscal 2022 earnings moved north by 7.4% to $35.49 per share over the last 60 days.
GlobalFoundries: The Malta, NY-based manufacturer of a range of semiconductor devices, including microprocessors, mobile application processors, baseband processors, network processors, radio frequency modems, microcontrollers, power management units and microelectromechanical systems, continues to benefit from its position in the global semiconductor supply chain.
This Zacks Rank #2 company is positioned well to capitalize on the strengthening demand for pervasive semiconductor solutions. Its expanding global manufacturing footprint remains another major positive.
GlobalFoundries has returned 21.1% in the past year. The Zacks Consensus Estimate for the company's 2022 earnings moved north by 6.1% to $1.90 per share over the last 60 days.
Lattice Semiconductor: The Hillsboro, OR-based company is gaining from strong momentum across a number of different OEM server platforms. Advancement in its products, which are highly utilized in server and client-computing platforms, remains a major positive.
This Zacks Rank #2 company is well-poised to gain solid traction among client computing platforms on the back of support provided for functions like security, video bridging and IO aggregation in different form factors.
Lattice Semiconductor has returned 4.5% in the past year. The Zacks Consensus Estimate for the company's 2022 earnings moved north by 15.7% to $1.40 per share over the last 60 days.
Synaptics: The San Jose, CA-based company is benefiting from its leadership position in designing and marketing human interface solutions such as touchpads for notebook computers, capacitive touch screen controllers for handsets and biometric fingerprint sensors for mobile devices. Continued strong demand for notebooks, owing to the work-from-home and online learning trends, is a major tailwind.
This Zacks Rank #2 company is further gaining from the new design momentum with its Organic Light Emitting Diode touch sensors. Also, solid prospects in its Internet of Things business remain noteworthy.
Synaptics has returned 21.5% in the past year. The Zacks Consensus Estimate for the company's fiscal 2022 earnings moved north by 3% to $12.89 per share over the last 60 days.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights Broadcom, GlobalFoundries, Lattice Semiconductor, and Synaptics
For Immediate Release
Chicago, IL – April 11, 2022 – Today, Zacks Equity Research discusses Broadcom (AVGO - Free Report) , GlobalFoundries (GFS - Free Report) , Lattice Semiconductor (LSCC - Free Report) and Synaptics (SYNA - Free Report) .
Industry: Electronics
Link: https://www.zacks.com/commentary/1895601/4-top-stocks-to-consider-from-prospering-electronics-industry
The Zacks Electronics - Semiconductors industry has been benefiting from the solid adoption of laptops, notebooks, office equipment and network peripherals worldwide. The growing proliferation of AI, Machine Learning (ML) and industrial revolution 4.0 (which focuses on interconnectivity and automation) has turned out to be a boon for industry players like Broadcom, GlobalFoundries, Lattice Semiconductor and Synaptics. The growing demand for high-volume consumer electronic devices, including digital media players, smartphones, tablets, efficient packaging, machine vision solutions, and robotics, should continue to drive the industry's growth.
Industry Description
The Zacks Electronics – Semiconductors industry primarily comprises companies that provide a wide range of semiconductor technologies. Their offerings include packaging and test services, wafer cleaning, factory automation, face detection, and image-recognition capabilities to develop smart and connected products. The industry participants primarily cater to end-markets constituting consumer electronics, communications, computing, industrial and automotive.
Notably, the companies are increasing their spending on research and development in order to stay afloat in an era of technological advancements and changing industry standards. The underlined industry is experiencing solid demand for advanced electronic equipment, which is helping its participants increase their investments in cost-effective process technologies.
What's Shaping the Future of the Electronics - Semiconductors Industry?
Smart Devices Aiding Computing Demand: Smart devices need computing and learning capabilities to perform functions like face detection, image recognition and video analytics capabilities. These require high levels of processing power, speed and memory, and low power consumption. In addition, these require better graphic processors and solutions, which bode well for the industry. Graphic solutions help increase the speed of rendering images and improve image resolution as well as color definition.
Prospects Around Advanced Packaging Robust: The increasing demand for miniaturization, greater functionality, lower power consumption, and improved thermal, as well as electrical performance, are driving the demand for semiconductor packaging as well as test technologies. The growing requirement for advanced packaging is gaining traction in the semiconductor industry, which is a key catalyst for the industry participants.
Solid Adoption of Electronic Goods a Tailwind: Electronics, which aid efficiency and automation, have become ubiquitous these days. The industry has been gaining from an increased demand for electronic goods and appliances, fueled by the coronavirus-induced safety rules and precautions. The ongoing global digital wave has been driving growth of electronic components and cloud services, benefiting the industry.
Zacks Industry Rank Indicates Impressive Prospects
The Zacks Electronics - Semiconductors industry is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #95, which places it in the top 38% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry's positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group's earnings growth potential. Since Dec 31, 2021, the industry's earnings estimates for the current year have moved up 8.1%.
Before we present a few stocks that you may want to consider for your portfolio, let's look at the industry's recent stock-market performance and valuation picture.
Industry Lags S&P 500, Outperforms Sector
The Zacks Electronics - Semiconductors industry has underperformed the Zacks S&P 500 composite but surpassed the broader Zacks Computer and Technology sector over the past year.
The industry has gained 8.2% over this period compared with the S&P 500's rise of 9.3%. The broader sector has lost 2.7% in the said period.
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing electronics semiconductors stocks, the industry is currently trading at 16.59X versus the S&P 500 and the sector's 19.73X and 23.56X, respectively.
Over the past five years, the industry has traded as high as 44.87X, as low as 5.62X and recorded a median of 12.57X.
4 Electronics Semiconductor Stocks to Buy
Broadcom: The San Jose, CA-headquartered designer, developer and global supplier of a broad range of semiconductor devices is riding on the continued strength across both Semiconductor solutions and Infrastructure software verticals. The robust adoption of next-generation PON, with Wi-Fi 6 and 6C access gateways, is a major positive. An acceleration in 5G deployment, production ramp-up and an increase in radio frequency content favor prospects.
This Zacks Rank #2 (Buy) company is well-positioned to capitalize on the increased spending by telecommunication companies in modernizing infrastructure and enhancing Edge and core networks, as well as higher cloud spending by data centers. The solid demand for broadband, networking and wireless products remains another tailwind.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Broadcom has returned 24.2% in the past year. The Zacks Consensus Estimate for the company's fiscal 2022 earnings moved north by 7.4% to $35.49 per share over the last 60 days.
GlobalFoundries: The Malta, NY-based manufacturer of a range of semiconductor devices, including microprocessors, mobile application processors, baseband processors, network processors, radio frequency modems, microcontrollers, power management units and microelectromechanical systems, continues to benefit from its position in the global semiconductor supply chain.
This Zacks Rank #2 company is positioned well to capitalize on the strengthening demand for pervasive semiconductor solutions. Its expanding global manufacturing footprint remains another major positive.
GlobalFoundries has returned 21.1% in the past year. The Zacks Consensus Estimate for the company's 2022 earnings moved north by 6.1% to $1.90 per share over the last 60 days.
Lattice Semiconductor: The Hillsboro, OR-based company is gaining from strong momentum across a number of different OEM server platforms. Advancement in its products, which are highly utilized in server and client-computing platforms, remains a major positive.
This Zacks Rank #2 company is well-poised to gain solid traction among client computing platforms on the back of support provided for functions like security, video bridging and IO aggregation in different form factors.
Lattice Semiconductor has returned 4.5% in the past year. The Zacks Consensus Estimate for the company's 2022 earnings moved north by 15.7% to $1.40 per share over the last 60 days.
Synaptics: The San Jose, CA-based company is benefiting from its leadership position in designing and marketing human interface solutions such as touchpads for notebook computers, capacitive touch screen controllers for handsets and biometric fingerprint sensors for mobile devices. Continued strong demand for notebooks, owing to the work-from-home and online learning trends, is a major tailwind.
This Zacks Rank #2 company is further gaining from the new design momentum with its Organic Light Emitting Diode touch sensors. Also, solid prospects in its Internet of Things business remain noteworthy.
Synaptics has returned 21.5% in the past year. The Zacks Consensus Estimate for the company's fiscal 2022 earnings moved north by 3% to $12.89 per share over the last 60 days.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.