For Immediate Release
Chicago, IL – April 18, 2022 – Zacks.com announced the listing of stocks on the Analyst Blog. Zacks Equity Research analysts discuss the latest news and events affecting stocks and financial markets every day. Stocks recently blogged include: NVIDIA Corp. NVDA, Analog Devices Inc. ADI, Broadcom Inc. AVGO, GLOBALFOUNDRIES Inc. GFS and Micron Technology Inc. MU.
Here are the highlights from Thursday’s Analyst Blog:
Top 5 Chipmakers in Profitable Valuations for a Solid Portfolio
The technology sector, in which the semiconductor makes up a significant part, received a bloody blow as soon as 2022 entered. Rising inflation since mid-2021 has forced the Fed to end its quantitative easing program and raise its benchmark lending rate in March.
The March FOMC minutes also revealed that Fed officials had almost unanimously agreed that the central bank should shrink its $9 trillion balance sheet size by about $95 a month from May. The minutes also revealed that most officials agreed that the Fed should raise interest rates by 50 basis points at the next two FOMCs in May and June. As a result, the bloodbath in the tech sector is visible year after year.
The Philadelphia Semiconductor Index (SOX) is down 21% to date. However, the recent market turmoil has made several US chipset big guys attractive at current market valuations. We’ve selected five semiconductor stocks with an appropriate Zacks Rating that should move one’s portfolio forward. These – NVIDIA Corp., Analog Devices Inc., Broadcom Inc., GLOBALFOUNDRIES Inc., and Mikron Technology Inc..
Strong Demand for Chipsets
The use of chipsets is increasing rapidly in various industries. Chipsets are used everywhere, from consumer electronics to automakers, from high-end computers to medical devices and fighter jet missile systems. However, the coronavirus-induced malfunction of the global chipset supply chain system has wreaked havoc in the economy and caused inflation to soar around the world.
Electronics that help efficiency and automation have become ubiquitous. The chipset industry is profiting from increased demand for electronics and devices fueled by coronavirus-driven safety rules and precautions. The ongoing global digital wave is driving the growth of electronic components and cloud services, benefiting the semiconductor industry.
Increasing demand for miniaturization, greater functionality, lower power consumption and improved thermal and electrical performance is driving the demand for semiconductor packaging as well as test technologies. The growing requirement for advanced packaging is gaining traction in the semiconductor industry and is a key catalyst for industry participants.
In January, the Biden administration reported that a global semiconductor shortage would persist until at least the second half of 2022. “There is a significant, persistent mismatch in supply and demand for chips,” the report said.
Several giant chipset manufacturers in the United States, Asia and Europe are increasing their capital expenditures by creating new facilities for chipset production to meet the largely suppressed demand. Demand for chipsets will remain strong due to the complexity of new leading technologies.
The Catalyst of the Future for the Semiconductor Industry
The White House has pressed the US Congress to quickly pass legislation that would provide $52 billion to assist computer chip makers and reduce shortages of vital components to a number of industries.
The Biden administration has expressed concern that in 1990 the United States accounted for 37% of global semiconductor and microelectronics production, and that share had fallen substantially to just 12%. As a result, US businesses, particularly the auto and high-tech industries, are suffering from an acute chipset shortage due to disruption of the global supply chain during the pandemic.
Our Top Picks
We narrowed our search to five U.S. semiconductor giants that are currently trading bearish. These stocks have positive growth potential for 2022 and have witnessed solid earnings forecast revisions over the past 60 days. Each of our picks carries a Zacks Rank #1 (Buy Strong) or 2 (Buy). You can see Here is the full list of Zacks #1 Rank stocks today.
NVIDIA taking advantage of the coronavirus-induced wave of work and learning at home. NVIDIA is also benefiting from strong growth in GeForce desktop and notebook GPUs, which drives gaming revenues. Also, the increase in demand for Hyperscale continues to be a tailwind for NVIDIA’s Data Center business.
The expansion of NVIDIA GeForce NOW is expected to drive its user base. Also, solid reception of AI-based smart cockpit infotainment solutions is a godsend. The collaboration with Daimler-owned Mercedes-Benz is expected to strengthen NVIDIA’s presence in autonomous vehicles and other automotive electronics areas.
Zacks Rank #1 NVDA expects earnings growth of 25% for the current year (ending January 2023). The Zacks Consensus Forecast for current year earnings is up 7.6% over the past 60 days. NVIDIA is currently trading at 35.9% off its 52-week high.
Analog devices strong in the communications, consumer, industrial and automotive end markets. Also, the solid demand for high-performance analog and mixed-signal solutions was a tailwind. The growing momentum in the electric vehicle space behind powerful Battery Management System solutions continues to be positive for ADI.
Also, increased power design gains are other positive features for Analog Devices. The HEV platform’s solid momentum in the cabin electronics ecosystem remains a tailwind for ADI. In addition, Analog Devices remains optimistic about its acquisition of Maxim and its growth prospects for 5G.
The Zacks Rank #2 ADI has a 30.5% earnings growth rate for the current year (ending October 2022). The Zacks Consensus Forecast for current year earnings is up 0.2% over the past 7 days. Analog Devices is currently trading down 17.6% from its 52-week high.
Micron Technology witnessing increasing demand for memory chips from cloud computing providers and accelerating 5G cellular network adoption. Increasing mix of high-value solutions, improvement in customer engagement and improvement in cost structure are other growth drivers of MU.
Furthermore, the adoption of 5G beyond mobile is likely to increase demand for memory and storage, particularly in IoT devices and wireless infrastructure. These will act as major positives going forward for Micron Technology.
The Zacks Rank #2 MU has a 57.4% earnings growth rate for the current year (ending August 2022). The Zacks Consensus Forecast for current year earnings is up 6.6% over the past 30 days. Micron Technology is currently trading at 26.5% off its 52-week high.
GLOBAL CLEANINGS operates as a worldwide semiconductor foundry. GFS manufactures integrated circuits that enable a variety of common electronic devices. The company provides feature-rich solutions that enable customers to develop innovative products for common chips.
GLOBALFOUNDRIES manufactures a range of semiconductor devices, including microprocessors, mobile application processors, baseband processors, network processors, radio frequency modems, microcontrollers, power management units and microelectromechanical systems.
Zacks Rank #2 GFS has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Forecast for current year earnings is up 6.1% over the last 60 days. GLOBALFOUNDRIES is currently trading at 31% off its 52-week high.
Broadcom constantly gaining strength in both the Semiconductor solutions and Infrastructure software sectors. In the fourth quarter of fiscal 2021, Semiconductor revenues benefited from high demand for wireless solutions and continued momentum in networking and broadband solutions.
AVGO’s networking revenues were driven by major share gains in ethernet network interface controllers in data centers as well as service providers’ direction in expanding 5G networks for backhaul, metro and paging. The synergy from the acquisition of CA and Symantec’s enterprise security business helped Broadcom’s results.
The Zacks Rank #2 AVGO expects earnings growth of 27.4% for the current year (ending October 2022). The Zacks Consensus Forecast for current year earnings rose 0.5% over the past 7 days. Broadcom is currently trading at 12.6% off its 52-week high.
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