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Which Semiconductor Stock Will be the Micron (MU) of 2018?
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The semiconductor industry has been one of the outperformers of 2017. Notably, the iShares PHLX Semiconductor ETF (SOXX - Free Report) , which represents semiconductor stocks, has witnessed a year-to-date (YTD) gain of approximately 38.9%, while the Technology Select Sector SPDR ETF (XLK - Free Report) , which represents the overall technology sector, has returned 32.6% during the same time period. This gain is way higher than the YTD returns of 19.7% and 28.9%, respectively clocked by the S&P 500 and Nasdaq Composite.
Micron Technology, Inc. (MU - Free Report) remains one of the outstanding performers in the semiconductor space. The stock has been clocking solid returns since the beginning of the year and has appreciated more than 92% in the YTD period. This robust performance has been mainly spurred by the company’s phenomenal results in last few quarters.
Notably, this Zacks Rank #1 (Strong Buy) company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, generating an average positive surprise of 10.2%. Micron recorded significant top- and bottom-line year-over-year growth, during this period, primarily driven by improved pricing as well as elevated demand for DRAM and NAND chips.
Nevertheless, we fear Micron’s remarkable run might not continue into the next year as the stock’s forward price-earnings multiple is hovering near to its industry average. The company’s shares currently trade at a forward P/E multiple of 5.3x, while the industry average is 5.6x. Therefore, we believe the stock will definitely go up in 2018 but not as much as it did in the current year.
Therefore, as we approach 2018, we should look for stocks that have the potential to record significant growth like Micron did in 2017.
Other Picks in the Industry
As the U.S. economy is rebounding, we believe there are tremendous growth opportunities for the semiconductor stocks in 2018. The industry is poised to benefit from the increasing demand for chips that are used in cloud-based platforms, Artificial Intelligence (AI) tools, Augmented/Virtual (AR/VR) reality devices, autonomous cars, advanced driver assisted systems (ADAS), as well as Internet of Things (IoT) related software and hardware.
Also, the recently-passed Tax Cuts And Jobs Act will benefit the technology sector as companies across sectors might utilize savings from lower tax as well as cash repatriations for technological upgradation. This will again be conducive for the semiconductors space.
Additionally, as per latest predictions from World Semiconductor Trade Statistics (WSTS), semiconductor sales are likely to increase 7% in 2018.
Right now, the semiconductor segment has several promising stocks to choose from. Here we have picked four semiconductor stocks that have performed well in the year so far and have the potential to retain the momentum in the coming year as well. These stocks also have a favorable Zacks Rank #1 (Strong Buy) or #2 (Buy), VGM Style Score of A or B, and lower P/E multiple than the industry average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Four Promising Stocks
Our first choice is the world’s largest chip maker — Intel Corporation (INTC - Free Report) . Though this stock came late to the party, it is poised to witness tremendous growth in 2018 due to its strategy of focusing on fast-growing data-centric business model. Notably, for the last few quarters, Intel has been benefiting from the robust performance of the Data Center Group, IoT Group, and Non-Volatile Memory Solutions and Programmable Solutions Group.
Further, in a move to boost its PC market share, the company has been continuously bringing in new advanced products such as Xeon Scalable, Core 8 chips, Myriad X and next-generation desktop processors. The latest desktop processors are expected to back Intel's gaming endeavors amid stiff competition from AMD and NVIDIA.
In addition, anticipated improvement in the company’s cost structure and lower spending, primarily due to its improving operational efficiency will aid in expansion of margins.
The stock carries a Zacks Rank #2 and has a VGM Style Score of A. Moreover, Intel currently trades at a forward P/E multiple of 14.2x, which is lower than the industry average of 20.2x. Year to date, the company has gained 27.1%. (Looking for the Best Stocks for 2018? Be among the first to see our Top Ten Stocks for 2018 portfolio here.)
Another pick is Lam Research Corporation (LRCX - Free Report) , which supplies wafer fabrication equipment (“WFE”) and services to the semiconductor industry. The improving WFE market, strong demand for server DRAM and increased adoption rates of 3D NAND technology will continue to propel the company’s growth. The stock has rallied 74.3%, in the year so far.
Based on the Zacks Consensus Estimate, Lam is anticipated to finish fiscal 2018 with EPS growth of 48% and sales growth of 50%. On top of this, the stock currently trades at a forward P/E multiple of 12.5x, which is lower than the industry average of 20.1x. Lam is a Zacks Rank #2 stock and has a VGM Score of B.
Our next pick is Marvell Technology Group Ltd. (MRVL - Free Report) , which is a promising player in the solid state drive (SSD) controllers market and has been benefiting from the rising demand for SSD products. The storage market is witnessing a steady increase in demand, given fast-growing data volume and especially exponential growth in unstructured data. We believe the company is well positioned to grab this opportunity.
The stock carries a Zacks Rank #2 and has a VGM Score of B. Also, at a forward P/E multiple at 21.5x, the company currently trades at a huge discount to the industry average of 27.0x. The company has gained 57.5% in the YTD period.
The next stock which makes to our list is Applied Materials, Inc. (AMAT - Free Report) which is one of the largest suppliers of fabrication equipment to semiconductor, LCD and solar PV cell manufacturers. The company is currently riding on inflection-focused innovation strategy — its key growth driver.
It continues to witness technological advancements in semiconductor and display areas. Applied Materials is in a great position to grow sustainably and profitably, based on its robust pipeline of enabling technologies, supported by expanding opportunities on the semiconductor and display fronts. Also, 3D NAND, DRAM and patterning have led to significant market share gains.
Applied sees significant opportunities from emerging trends on the semiconductor and display fronts, such as artificial intelligence, big data, cloud infrastructure, IoT, virtual reality and smart vehicles.
The stock flaunts a Zacks Rank #1 and has a VGM Score of B. Also, at forward P/E multiple at 12.6x, the company currently trades at a huge discount to the industry average of 20.1x. Year to date, it has appreciated 58.2%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Which Semiconductor Stock Will be the Micron (MU) of 2018?
The semiconductor industry has been one of the outperformers of 2017. Notably, the iShares PHLX Semiconductor ETF (SOXX - Free Report) , which represents semiconductor stocks, has witnessed a year-to-date (YTD) gain of approximately 38.9%, while the Technology Select Sector SPDR ETF (XLK - Free Report) , which represents the overall technology sector, has returned 32.6% during the same time period. This gain is way higher than the YTD returns of 19.7% and 28.9%, respectively clocked by the S&P 500 and Nasdaq Composite.
Micron Technology, Inc. (MU - Free Report) remains one of the outstanding performers in the semiconductor space. The stock has been clocking solid returns since the beginning of the year and has appreciated more than 92% in the YTD period. This robust performance has been mainly spurred by the company’s phenomenal results in last few quarters.
Notably, this Zacks Rank #1 (Strong Buy) company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, generating an average positive surprise of 10.2%. Micron recorded significant top- and bottom-line year-over-year growth, during this period, primarily driven by improved pricing as well as elevated demand for DRAM and NAND chips.
Nevertheless, we fear Micron’s remarkable run might not continue into the next year as the stock’s forward price-earnings multiple is hovering near to its industry average. The company’s shares currently trade at a forward P/E multiple of 5.3x, while the industry average is 5.6x. Therefore, we believe the stock will definitely go up in 2018 but not as much as it did in the current year.
Therefore, as we approach 2018, we should look for stocks that have the potential to record significant growth like Micron did in 2017.
Other Picks in the Industry
As the U.S. economy is rebounding, we believe there are tremendous growth opportunities for the semiconductor stocks in 2018. The industry is poised to benefit from the increasing demand for chips that are used in cloud-based platforms, Artificial Intelligence (AI) tools, Augmented/Virtual (AR/VR) reality devices, autonomous cars, advanced driver assisted systems (ADAS), as well as Internet of Things (IoT) related software and hardware.
Also, the recently-passed Tax Cuts And Jobs Act will benefit the technology sector as companies across sectors might utilize savings from lower tax as well as cash repatriations for technological upgradation. This will again be conducive for the semiconductors space.
Additionally, as per latest predictions from World Semiconductor Trade Statistics (WSTS), semiconductor sales are likely to increase 7% in 2018.
Right now, the semiconductor segment has several promising stocks to choose from. Here we have picked four semiconductor stocks that have performed well in the year so far and have the potential to retain the momentum in the coming year as well. These stocks also have a favorable Zacks Rank #1 (Strong Buy) or #2 (Buy), VGM Style Score of A or B, and lower P/E multiple than the industry average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Four Promising Stocks
Our first choice is the world’s largest chip maker — Intel Corporation (INTC - Free Report) . Though this stock came late to the party, it is poised to witness tremendous growth in 2018 due to its strategy of focusing on fast-growing data-centric business model. Notably, for the last few quarters, Intel has been benefiting from the robust performance of the Data Center Group, IoT Group, and Non-Volatile Memory Solutions and Programmable Solutions Group.
Further, in a move to boost its PC market share, the company has been continuously bringing in new advanced products such as Xeon Scalable, Core 8 chips, Myriad X and next-generation desktop processors. The latest desktop processors are expected to back Intel's gaming endeavors amid stiff competition from AMD and NVIDIA.
In addition, anticipated improvement in the company’s cost structure and lower spending, primarily due to its improving operational efficiency will aid in expansion of margins.
The stock carries a Zacks Rank #2 and has a VGM Style Score of A. Moreover, Intel currently trades at a forward P/E multiple of 14.2x, which is lower than the industry average of 20.2x. Year to date, the company has gained 27.1%. (Looking for the Best Stocks for 2018? Be among the first to see our Top Ten Stocks for 2018 portfolio here.)
Another pick is Lam Research Corporation (LRCX - Free Report) , which supplies wafer fabrication equipment (“WFE”) and services to the semiconductor industry. The improving WFE market, strong demand for server DRAM and increased adoption rates of 3D NAND technology will continue to propel the company’s growth. The stock has rallied 74.3%, in the year so far.
Based on the Zacks Consensus Estimate, Lam is anticipated to finish fiscal 2018 with EPS growth of 48% and sales growth of 50%. On top of this, the stock currently trades at a forward P/E multiple of 12.5x, which is lower than the industry average of 20.1x. Lam is a Zacks Rank #2 stock and has a VGM Score of B.
Our next pick is Marvell Technology Group Ltd. (MRVL - Free Report) , which is a promising player in the solid state drive (SSD) controllers market and has been benefiting from the rising demand for SSD products. The storage market is witnessing a steady increase in demand, given fast-growing data volume and especially exponential growth in unstructured data. We believe the company is well positioned to grab this opportunity.
The stock carries a Zacks Rank #2 and has a VGM Score of B. Also, at a forward P/E multiple at 21.5x, the company currently trades at a huge discount to the industry average of 27.0x. The company has gained 57.5% in the YTD period.
The next stock which makes to our list is Applied Materials, Inc. (AMAT - Free Report) which is one of the largest suppliers of fabrication equipment to semiconductor, LCD and solar PV cell manufacturers. The company is currently riding on inflection-focused innovation strategy — its key growth driver.
It continues to witness technological advancements in semiconductor and display areas. Applied Materials is in a great position to grow sustainably and profitably, based on its robust pipeline of enabling technologies, supported by expanding opportunities on the semiconductor and display fronts. Also, 3D NAND, DRAM and patterning have led to significant market share gains.
Applied sees significant opportunities from emerging trends on the semiconductor and display fronts, such as artificial intelligence, big data, cloud infrastructure, IoT, virtual reality and smart vehicles.
The stock flaunts a Zacks Rank #1 and has a VGM Score of B. Also, at forward P/E multiple at 12.6x, the company currently trades at a huge discount to the industry average of 20.1x. Year to date, it has appreciated 58.2%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>