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5 Top-Ranked Semiconductor Stocks to Buy for Better Returns
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The semiconductor industry has continued to showcase its bullish run so far in 2021 following an impressive performance in 2020 despite coronavirus-induced macroeconomic crisis. Sales in the global semiconductor industry grew 6.5% year over year to $439 billion in 2020, per data from the Semiconductor Industry Association (or SIA).
Demand for microchips surged during the peak of the pandemic when sales of electronic goods skyrocketed, thus boosting semiconductor sales. So much so that there is presently a supply crunch for microchips that is affecting production of electronic and automobiles. However, this supply shortage suggests that the semiconductor industry is on track for further growth attributed to strong demand.
Markedly, global semiconductor sales reflected both a month-over-month and a year-over-year increase in January according to the latest data from the SIA.
The global semiconductor industry, which is the building block for emerging technologies including AI, ML, IoT, blockchain, and advanced quantum computing, is poised to perform well in 2021.
In fact, per the latest World Semiconductor Trade Statistics data, the global semiconductor market is now predicted to improve 8.4% in 2021, based on double-digit growth of memory and optoelectronics. The forecast for 2021 is higher than the previously projected growth of 6.2%, made by WSTS in July.
Bright Prospects for the Semiconductor Space In 2021
Evolution of semiconductor manufacturing processes from 10 nanometer (nm) to 7 nm and even 5 nm technology is opening new business avenues.
Microchip demand is expected to get a boost with the 5G boom in Europe and parts of Asia, including China and Singapore. New 5G smartphone devices from Apple (AAPL - Free Report) and Samsung will make the technology more accessible. Intel (INTC - Free Report) and MediaTek-supported 5G notebooks are also expected to hit the shelves in 2021.
Meanwhile, high-speed 5G rollout is also expected to accelerate the adoption of IoT. These are expected to result in unprecedented demand for memory chip, power amplifier and AI semiconductors.
Moreover, ongoing infusion of AI and ML, high performance computing (HPC) applications, gaming, wearables, drones, EVs and VR/AR devices are fueling massive growth in the semiconductor space.
Accelerated rate of digital transformation, with work-from-home and web-based learning trends bolstering demand for processors utilized in enterprise laptops, data center servers, PC systems, notebooks, tablets, and smartphones, is expected to benefit the chip stocks in 2021.
Notably, the broader iShares PHLX Semiconductor ETF (SOXX) is up 5.1% compared with the SPDR S&P 500 ETF's (SPY) rally of 3.5% in the year-to-date period.
Our Picks
Here we pick five semiconductor stocks that are well-positioned to benefit from the above-mentioned trends. Apart from having strong fundamentals, these stocks sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Year-to-Date Performance
Vishay Intertechnology (VSH - Free Report) is well positioned to capitalize on the growing proliferation of applications related to passive electronic-component devices and the increasing demand for sophisticated electronic-component designs.
Further, its strong thermistor offerings will likely benefit from the growing adoption of building and home automation systems, the increasing use of temperature sensors in the automotive industry, and rising applications of portable and advance healthcare equipment across the world.
The recent launch of NTCALUG family of NTC lug thermistors makes this Zacks Rank #1 company well-poised to gain strong traction among automotive, consumer and industrial applications as the NTCALUG family features accurate temperature-sensing capability.
The Zacks Consensus Estimate for its fiscal 2021 earnings has been revised upward by 29.3% in 30 days’ time to $1.72 per share, suggesting 87% growth from the figure reported in the year-ago quarter.
Micron Technology (MU - Free Report) is gaining from solid demand for memory chips from cloud-computing providers and acceleration in 5G adoption.
This Zacks Rank #2 company has been witnessing stronger memory-chip demand from PC manufacturers and data-center operators. Further, 5G adoption beyond mobile is likely to spur demand for memory and storage, particularly in IoT devices and wireless infrastructure. Also, focus on improving its cost structure and increasing the mix of high-value solutions in its portfolio is likely to drive margins.
The Zacks Consensus Estimate for its fiscal 2021 earnings has been revised upward by 18.5% in 30 days’ time to $4.61 per share, suggesting 62.9% growth from the figure reported in the year-ago quarter. For fiscal 2022, the consensus mark for earnings has moved north by 19.3% to $9.09 per share over the same time frame, suggesting 97.08% growth from the figure reported in the year-ago quarter.
NVIDIA (NVDA - Free Report) is benefiting from the pandemic-induced work-from-home and learn-at-home wave. The company is poised to gain from solid demand for GeForce desktop and notebook GPUs, which is anticipated to boost gaming revenues. Moreover, a surge in Hyperscale demand is a tailwind for this Zacks Rank #2 company’s Data Center business.
Further, the Arm acquisition is expected to aid NVIDIA in offering end-to-end ecosystem of technology across the data center, IoT, autonomous vehicles and mobile domains. NVIDIA is now well positioned to upscale its inference technology, drivers, and accelerators by utilizing Arm’s robust architecture and chip designs.
The Zacks Consensus Estimate for its fiscal 2021 earnings has been revised upward by 14.2% in the past 30 days to $13.27 per share. The figure indicates growth of 32.7% on a year-over-year basis.
Applied Materials (AMAT - Free Report) is one of the world’s largest suppliers of fabrication equipment for semiconductors, flat panel liquid crystal displays (LCDs), and solar photovoltaic (PV) cells and modules.
This Zacks Rank #2 company is benefiting from portfolio strength, its expanding position in memory and increasing new design wins. Further, growth opportunities across specialty nodes and the new nodes ramp across foundry, logic, NAND, and DRAM are expected to benefit Applied Materials in the near term.
The Zacks Consensus Estimate for 2021 and 2022 earnings is up 19.4% and 17.4% in the past 30 days to $5.98 per share and $6.49 per share, suggesting growth of 43.4% and 8.63%, respectively.
Analog Devices’ (ADI - Free Report) communications market is anticipated to perform well in 2021, driven by strength of the wireless segment. The accelerated build out of TD-LTE in China, continuing 5G network densification activities in the United States and deployments in Europe are expected to aid the communications segment.
Moreover, strength in the company’s industrial segment and increased focus on innovation and operational execution are key positives.
The Zacks Consensus Estimate for 2021 and 2022 earnings is up 5.4% and 3.5% in the past 30 days to $6 per share and $6.55 per share, suggesting growth of 22.2% and 9.27% year over year, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Shutterstock
5 Top-Ranked Semiconductor Stocks to Buy for Better Returns
The semiconductor industry has continued to showcase its bullish run so far in 2021 following an impressive performance in 2020 despite coronavirus-induced macroeconomic crisis. Sales in the global semiconductor industry grew 6.5% year over year to $439 billion in 2020, per data from the Semiconductor Industry Association (or SIA).
Demand for microchips surged during the peak of the pandemic when sales of electronic goods skyrocketed, thus boosting semiconductor sales. So much so that there is presently a supply crunch for microchips that is affecting production of electronic and automobiles. However, this supply shortage suggests that the semiconductor industry is on track for further growth attributed to strong demand.
Markedly, global semiconductor sales reflected both a month-over-month and a year-over-year increase in January according to the latest data from the SIA.
The global semiconductor industry, which is the building block for emerging technologies including AI, ML, IoT, blockchain, and advanced quantum computing, is poised to perform well in 2021.
In fact, per the latest World Semiconductor Trade Statistics data, the global semiconductor market is now predicted to improve 8.4% in 2021, based on double-digit growth of memory and optoelectronics. The forecast for 2021 is higher than the previously projected growth of 6.2%, made by WSTS in July.
Bright Prospects for the Semiconductor Space In 2021
Evolution of semiconductor manufacturing processes from 10 nanometer (nm) to 7 nm and even 5 nm technology is opening new business avenues.
Microchip demand is expected to get a boost with the 5G boom in Europe and parts of Asia, including China and Singapore. New 5G smartphone devices from Apple (AAPL - Free Report) and Samsung will make the technology more accessible. Intel (INTC - Free Report) and MediaTek-supported 5G notebooks are also expected to hit the shelves in 2021.
IDC expects 5G smartphone shipments to grow to 58% in 2024 from 19% of global volume in 2020, which should act as a tailwind for the semiconductor market.
Meanwhile, high-speed 5G rollout is also expected to accelerate the adoption of IoT. These are expected to result in unprecedented demand for memory chip, power amplifier and AI semiconductors.
Moreover, ongoing infusion of AI and ML, high performance computing (HPC) applications, gaming, wearables, drones, EVs and VR/AR devices are fueling massive growth in the semiconductor space.
Accelerated rate of digital transformation, with work-from-home and web-based learning trends bolstering demand for processors utilized in enterprise laptops, data center servers, PC systems, notebooks, tablets, and smartphones, is expected to benefit the chip stocks in 2021.
Notably, the broader iShares PHLX Semiconductor ETF (SOXX) is up 5.1% compared with the SPDR S&P 500 ETF's (SPY) rally of 3.5% in the year-to-date period.
Our Picks
Here we pick five semiconductor stocks that are well-positioned to benefit from the above-mentioned trends. Apart from having strong fundamentals, these stocks sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Year-to-Date Performance
Vishay Intertechnology (VSH - Free Report) is well positioned to capitalize on the growing proliferation of applications related to passive electronic-component devices and the increasing demand for sophisticated electronic-component designs.
Further, its strong thermistor offerings will likely benefit from the growing adoption of building and home automation systems, the increasing use of temperature sensors in the automotive industry, and rising applications of portable and advance healthcare equipment across the world.
The recent launch of NTCALUG family of NTC lug thermistors makes this Zacks Rank #1 company well-poised to gain strong traction among automotive, consumer and industrial applications as the NTCALUG family features accurate temperature-sensing capability.
The Zacks Consensus Estimate for its fiscal 2021 earnings has been revised upward by 29.3% in 30 days’ time to $1.72 per share, suggesting 87% growth from the figure reported in the year-ago quarter.
Micron Technology (MU - Free Report) is gaining from solid demand for memory chips from cloud-computing providers and acceleration in 5G adoption.
This Zacks Rank #2 company has been witnessing stronger memory-chip demand from PC manufacturers and data-center operators. Further, 5G adoption beyond mobile is likely to spur demand for memory and storage, particularly in IoT devices and wireless infrastructure. Also, focus on improving its cost structure and increasing the mix of high-value solutions in its portfolio is likely to drive margins.
The Zacks Consensus Estimate for its fiscal 2021 earnings has been revised upward by 18.5% in 30 days’ time to $4.61 per share, suggesting 62.9% growth from the figure reported in the year-ago quarter. For fiscal 2022, the consensus mark for earnings has moved north by 19.3% to $9.09 per share over the same time frame, suggesting 97.08% growth from the figure reported in the year-ago quarter.
NVIDIA (NVDA - Free Report) is benefiting from the pandemic-induced work-from-home and learn-at-home wave. The company is poised to gain from solid demand for GeForce desktop and notebook GPUs, which is anticipated to boost gaming revenues. Moreover, a surge in Hyperscale demand is a tailwind for this Zacks Rank #2 company’s Data Center business.
Further, the Arm acquisition is expected to aid NVIDIA in offering end-to-end ecosystem of technology across the data center, IoT, autonomous vehicles and mobile domains. NVIDIA is now well positioned to upscale its inference technology, drivers, and accelerators by utilizing Arm’s robust architecture and chip designs.
The Zacks Consensus Estimate for its fiscal 2021 earnings has been revised upward by 14.2% in the past 30 days to $13.27 per share. The figure indicates growth of 32.7% on a year-over-year basis.
Applied Materials (AMAT - Free Report) is one of the world’s largest suppliers of fabrication equipment for semiconductors, flat panel liquid crystal displays (LCDs), and solar photovoltaic (PV) cells and modules.
This Zacks Rank #2 company is benefiting from portfolio strength, its expanding position in memory and increasing new design wins. Further, growth opportunities across specialty nodes and the new nodes ramp across foundry, logic, NAND, and DRAM are expected to benefit Applied Materials in the near term.
The Zacks Consensus Estimate for 2021 and 2022 earnings is up 19.4% and 17.4% in the past 30 days to $5.98 per share and $6.49 per share, suggesting growth of 43.4% and 8.63%, respectively.
Analog Devices’ (ADI - Free Report) communications market is anticipated to perform well in 2021, driven by strength of the wireless segment. The accelerated build out of TD-LTE in China, continuing 5G network densification activities in the United States and deployments in Europe are expected to aid the communications segment.
Moreover, strength in the company’s industrial segment and increased focus on innovation and operational execution are key positives.
The Zacks Consensus Estimate for 2021 and 2022 earnings is up 5.4% and 3.5% in the past 30 days to $6 per share and $6.55 per share, suggesting growth of 22.2% and 9.27% year over year, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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