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3 Top Stocks to Buy From Electronics - Semiconductor Industry
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The Zacks Electronics - Semiconductors industry is benefiting from the growing proliferation of AI, Machine Learning (ML) and industrial revolution 4.0 (which focuses on interconnectivity and automation). The solid adoption of laptops, notebooks, office equipments and network peripherals worldwide has turned out to be a boon for industry players like GlobalFoundries (GFS - Free Report) , Lattice Semiconductor (LSCC - Free Report) and Cirrus Logic (CRUS - Free Report) . 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.
However, widening supply-chain challenges, end-market volatility, inflationary pressures and growing geo-political tensions are persistent concerns for the underlined industry.
Industry Description
The Zacks Electronics – Semiconductors industry comprises firms 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 participants primarily cater to end-markets constituting consumer electronics, communications, computing, industrial and automotive. These companies are raising their spending on research and development 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 these firms increase their investments in cost-effective process technologies.
What's Shaping the Future of the Electronics - Semiconductors Industry?
5G Prospects Are Key Catalysts: The growing deployment of 5G will expose industry players to near-term prospects. An uptick in demand for 5G test solutions required for 5G deployment is another major positive. The growing number of high-speed data centers worldwide, which require ultra-fast internet that 5G promises to deliver, is another tailwind. Increased connectivity and use of technology in consumer electronics through IoT, AI, robotics, AR/VR and others further set the momentum for 5G. Given the upbeat scenario, the industry is anticipated to remain on a growth trajectory, backed by efforts to strengthen 5G infrastructure.
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 as well as better graphic processors and solutions, which bode well for the industry. Graphic solutions help increase the speed of rendering images and improve image resolution and color definition.
Prospects Around Advanced Packaging Robust: Higher requirement for miniaturization, greater functionality, lower power consumption and improved thermal and electrical performance is driving the demand for semiconductor packaging and test technologies. The growing demand for advanced packaging is gaining traction in the semiconductor industry, which is a key catalyst for industry participants.
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 #123, which places it in the top 49% 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.
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 Outperforms S&P 500 & Sector
The Zacks Electronics - Semiconductors industry has outperformed the Zacks S&P 500 composite and surpassed the broader Zacks Computer and Technology sector in the past year.
The companies in the industry have collectively gained 49.9% compared with the S&P 500 and the broader sector’s rally of 15.2% and 23.2%, respectively.
One-Year Price Performance
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 24.2X versus the S&P 500 and the sector’s 20.14X and 25.9X, respectively.
Over the past five years, the industry has traded as high as 44.45X, as low as 5.58X and recorded a median of 15.85X, as the charts below show.
Price/Earnings Ratio (F12M)
3 Electronics Semiconductor Stocks to Buy
Lattice Semiconductor: This Hillsboro, OR-based player is gaining traction from the strong momentum across a number of different OEM server platforms. Strength in data center servers, 5G wireless infrastructure and data center networking is a tailwind. Moreover, advancement in its products that are widely utilized on server and client-computing platforms is a major positive.
The Zacks Rank #1 (Strong Buy) entity is well-poised to gain solid traction across the industrial and automotive markets on the back of its solid momentum in multiple applications such as industrial, automation and robotics, ADAS and infotainment systems.
LSCC has gained 40.9% in the past year. The Zacks Consensus Estimate for the stock’s 2023 earnings has been stable at $2.10 per share in the past 30 days.
Price and Consensus: LSCC
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.
The Zacks Rank #2 (Buy) company is positioned well to capitalize on the strong demand for pervasive semiconductor solutions. Its expanding global manufacturing footprint is another positive.
GlobalFoundries has gained 36.7% in the past year. The Zacks Consensus Estimate for the company’s 2023 earnings was stable at $2.18 per share in the last 30 days.
Price and Consensus: GFS
Cirrus Logic: Austin, TX-headquartered CRUS is gaining from strong customer engagement across its portfolio. Solid demand for Cirrus Logic’s audio and haptic solutions remains another tailwind. Moreover, an increase in the penetration of its audio solutions in smartphones is a positive.
The Zacks #2 ranked company, which develops, manufactures and markets analog, mixed-signal and audio DSP integrated circuits, is well-positioned to capitalize on growth opportunities in voice biometrics and closed-loop controllers. Moreover, its growing efforts toward expanding into other applications such as laptops, gaming, tablets and AR/VR are other positives.
Cirrus Logic has lost 2.5% in the past year. The Zacks Consensus Estimate for the stock’s fiscal 2024 earnings has been stable at $5.12 per share in the past 30 days.
Price and Consensus: CRUS
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3 Top Stocks to Buy From Electronics - Semiconductor Industry
The Zacks Electronics - Semiconductors industry is benefiting from the growing proliferation of AI, Machine Learning (ML) and industrial revolution 4.0 (which focuses on interconnectivity and automation). The solid adoption of laptops, notebooks, office equipments and network peripherals worldwide has turned out to be a boon for industry players like GlobalFoundries (GFS - Free Report) , Lattice Semiconductor (LSCC - Free Report) and Cirrus Logic (CRUS - Free Report) . 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.
However, widening supply-chain challenges, end-market volatility, inflationary pressures and growing geo-political tensions are persistent concerns for the underlined industry.
Industry Description
The Zacks Electronics – Semiconductors industry comprises firms 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 participants primarily cater to end-markets constituting consumer electronics, communications, computing, industrial and automotive. These companies are raising their spending on research and development 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 these firms increase their investments in cost-effective process technologies.
What's Shaping the Future of the Electronics - Semiconductors Industry?
5G Prospects Are Key Catalysts: The growing deployment of 5G will expose industry players to near-term prospects. An uptick in demand for 5G test solutions required for 5G deployment is another major positive. The growing number of high-speed data centers worldwide, which require ultra-fast internet that 5G promises to deliver, is another tailwind. Increased connectivity and use of technology in consumer electronics through IoT, AI, robotics, AR/VR and others further set the momentum for 5G. Given the upbeat scenario, the industry is anticipated to remain on a growth trajectory, backed by efforts to strengthen 5G infrastructure.
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 as well as better graphic processors and solutions, which bode well for the industry. Graphic solutions help increase the speed of rendering images and improve image resolution and color definition.
Prospects Around Advanced Packaging Robust: Higher requirement for miniaturization, greater functionality, lower power consumption and improved thermal and electrical performance is driving the demand for semiconductor packaging and test technologies. The growing demand for advanced packaging is gaining traction in the semiconductor industry, which is a key catalyst for industry participants.
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 #123, which places it in the top 49% 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.
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 Outperforms S&P 500 & Sector
The Zacks Electronics - Semiconductors industry has outperformed the Zacks S&P 500 composite and surpassed the broader Zacks Computer and Technology sector in the past year.
The companies in the industry have collectively gained 49.9% compared with the S&P 500 and the broader sector’s rally of 15.2% and 23.2%, respectively.
One-Year Price Performance
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 24.2X versus the S&P 500 and the sector’s 20.14X and 25.9X, respectively.
Over the past five years, the industry has traded as high as 44.45X, as low as 5.58X and recorded a median of 15.85X, as the charts below show.
Price/Earnings Ratio (F12M)
3 Electronics Semiconductor Stocks to Buy
Lattice Semiconductor: This Hillsboro, OR-based player is gaining traction from the strong momentum across a number of different OEM server platforms. Strength in data center servers, 5G wireless infrastructure and data center networking is a tailwind. Moreover, advancement in its products that are widely utilized on server and client-computing platforms is a major positive.
The Zacks Rank #1 (Strong Buy) entity is well-poised to gain solid traction across the industrial and automotive markets on the back of its solid momentum in multiple applications such as industrial, automation and robotics, ADAS and infotainment systems.
You can see the complete list of today’s Zacks #1 Rank stocks here.
LSCC has gained 40.9% in the past year. The Zacks Consensus Estimate for the stock’s 2023 earnings has been stable at $2.10 per share in the past 30 days.
Price and Consensus: LSCC
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.
The Zacks Rank #2 (Buy) company is positioned well to capitalize on the strong demand for pervasive semiconductor solutions. Its expanding global manufacturing footprint is another positive.
GlobalFoundries has gained 36.7% in the past year. The Zacks Consensus Estimate for the company’s 2023 earnings was stable at $2.18 per share in the last 30 days.
Price and Consensus: GFS
Cirrus Logic: Austin, TX-headquartered CRUS is gaining from strong customer engagement across its portfolio. Solid demand for Cirrus Logic’s audio and haptic solutions remains another tailwind. Moreover, an increase in the penetration of its audio solutions in smartphones is a positive.
The Zacks #2 ranked company, which develops, manufactures and markets analog, mixed-signal and audio DSP integrated circuits, is well-positioned to capitalize on growth opportunities in voice biometrics and closed-loop controllers. Moreover, its growing efforts toward expanding into other applications such as laptops, gaming, tablets and AR/VR are other positives.
Cirrus Logic has lost 2.5% in the past year. The Zacks Consensus Estimate for the stock’s fiscal 2024 earnings has been stable at $5.12 per share in the past 30 days.
Price and Consensus: CRUS