Best semi conductor stocks to buy now

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Semiconductors have been part of our lives for many years now. But the COVID pandemic has spread semiconductors everywhere around the world. With the sudden rise in demand during the last year or so, the world is undergoing a semiconductor chip shortage. That means semiconductor companies are at the forefront of technological advancement during these times. Therefore, one must have the idea about the best semi conductor stocks.

The chips shortage could last well into 2022. However, the semiconductor stocks seem to be building even amidst the current needs. This might be the perfect time to enter into chip stocks looking towards long-term investments.

The greater demand for semiconductor chips means larger markets for the semiconductor industry. Let’s check the list of the best semi conductor stocks we’ve complied for you and how they could be a viable investment in the next few years.

Taiwan Semiconductor

Goldman Sachs darling, Taiwan Semiconductor (TSM), is the world’s largest chipmaker. Goldman analysts expect the chipmaker to gain around 80% market share in the three-nanometer processor market by 2023. That would be supported by higher market demand. Now, what does that mean for TSM? Simply, that would offer the company dominant pricing power.

Goldman says the stock can beat its 12-month price target by 41%. TSM stock has been trading around its major support level of $107.77 for the last one year. The RSI of stock is 33.03, which is almost near to oversold. Now, that’s a major upside signal for TSM stock.

Taiwan Semiconductor sales in the past five years have increased by almost 10%. That would surely change in the next three years as we expect. The quarter over quarter sales is nearly double to five years sales. TSM’s returns are pretty astonishing, with the return on investment around 22.50% and the return on equity around 29.30%.

There is a reason why Taiwan Semiconductor is in this position today. TSM’s cash by the year-end of 2020 was $6,590.10 million, up from $2,664.96 million and $1,989.10 million in the past two years, respectively. That’s due to the company’s cost advantage and its intangible assets. All-in-all, TSM stock looks like a gem in long-term growth.

Advanced Micro Devices

The second stock in the list of the best semi conductor stocks is AMD. Advanced Micro Devices (AMD) is another leading brand in the microchip industry and operates as a multinational worldwide. The company has driven innovation in high-performance computing, graphics, and visualization technologies. AMD has a large user base that comprises two segments computing and graphics, and enterprise, embedded, and semi-custom. Its products are also used by leading Fortune 500 businesses.

AMD is improving its market share as it increases its revenue, mainly due to a shift in its production to higher-margin chips and increased prices. AMD is also progressing in modern high-performance computing research. Recently, the company announced that its EPYC processors were picked by Argonne National Laboratory to power a new supercomputer called Polaris. That shows AMD is aiming to develop devices with the ability to solve complex problems.

If we look at the AMD stock, the fundamentals are pretty strong in the long-term prospect. Sales in the past five years have been up by 20%. The quarterly sales are almost 100% up, driven by higher computing devices demand. The returns from AMD stock are also impressive, with return on investment at 40.90% and return on equity at 59.10%.

Analysts are also optimistic and have a positive rating on average. The average price target is around $117.75. If Advanced Micro Devices continue to increase its market share, it will massively help the stock.

Analog Devices

The next stock in the list of the best semi conductor stocks in ADI. Analog Devices (ADI) is an original equipment manufacturer of semiconductor devices, specifically Analog, mixed-signal, and digital signal processing integrated circuits. ADI stock is another semiconductor that is one analyst favorite to perform well.

Analog’s earnings are expected to continuing the growth momentum in the fourth quarter of 2021. The company plans to take over Maxim Integrated Products to add to adjusted earnings six months ahead of its initial timeline. In addition, the next year’s target is to reach an earnings growth of 30.6%.

The faster-than-expected growth was due to more robust business fundamentals, share repurchases, and the realization of more than 40% of cost savings. The Maxim deal will integrate Analog into the automotive and 5G chipmaking market and boost its market share.

Moreover, Analog’s wBMS technology for electric vehicle batteries is another asset that will add to long-term growth. The chipmaker recently made a deal with British performance brand Lotus Cars to provide its wBMS technology.

On the other hand, ADI stock looks solid with the fundamentals. The share price of ADI has been around at is significant support level in the past six months, which is about $161. The institutional stake in ADI stock is above 70%, which is a great sign. The current P/E ratio is 35.90, which shows the bullish sentiment around the stock.

Analyst firm JP Morgan has to upgrade ADI to overweight with a price target between $119 to $215. At the same time, Wells Fargo and Morgan Stanley have given equal weight with price targets of $170 and $179, respectively.

QUALCOMM Incorporated

Qualcomm (QCOM) is another prominent chip maker and markets a wide array of semiconductors and related software services. QCOM stock has continuously grown since its incorporation into the market. That shows its long-term growth over the past three decades. The stock has more than doubled since the pandemic began.

Lately, Qualcomm has become a significant player in enabling 5G wireless tech worldwide. That is a massive advantage for the company and paves the way for long-term growth. Qualcomm’s Board of Directors has just approved a new $10 billion stock repurchase authorization.

Qualcomm stock is currently trading around its lowest 52-week range. If we look at the stock fundamentals, QCOM is in a good buy position. The earnings per share in the next five years are projected at around 32.19%. The returns are also staggering, with return on investment at 24.30% and return on equity at 126.70%. The quarter over quarter sales has increased by nearly 65%.

Apart from that, Qualcomm is working extremely hard on the operational front. The company is currently collaborating with semiconductor manufacturer GlobalFoundries. Through this team-up, the duo will be expanding their existing radio frequency-related partnership, further bolstering their cutting-edge 5G offerings.

FormFactor

The last stock in the list of the best semi conductor stocks is FORM. FormFactor (FORM) is not in the limelight as a top semiconductor stock, but it has exciting prospects. The company has had steady growth over the past years. The company is a leading semiconductor test and measurement supplier.

Earlier this year, FormFactor was named the best Test Equipment and Test Subsystems supplier. In contrast, it was named as the ten best Focused Suppliers of Semiconductor Equipment. All with five stars in these three categories. That shows how good FormFactor has been in the sector. But let’s dig into the fundamentals.

FormFactor’s EPS has grown 36% each year, compound, over three years. Investors usually take that as a tremendous growth indicator, and it shows an impressive outlook. The sales in the last five years have increased by almost 19.70%. The returns are also promising, with ROI at 9.90% and ROE at 10.60%. The quick ratio and current ratio are also solid at 3.50 and 2.30, respectively.

It’s essential for a company how the leaders reflect on the progress. It’s great to see FormFactor insiders exercising their options and investing in the stock. In 2021 alone, director and executives have excursed their options on several occasions. Reportedly, insiders own around $28 million worth of its stock. At the same time, institutional owners have a 92.80% stake in FORM stock.

Being on the sideline, FormFactor holds an excellent upside potential considering the growing microchip industry.

 

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