For Immediate Release
Chicago, IL – March 11, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: NVIDIA Corp. NVDA, Advanced Micro Devices Inc. AMD, Analog Devices Inc. ADI, Qualcomm Inc. QCOM and Micron Technology Inc. MU.
Here are highlights from Thursday’s Analyst Blog:
5 Must-Buy Semiconductor Giants at Attractive Valuations
Wall Street rebounded on Mar 9 after a four-day losing streak as soaring commodity prices, especially crude oil prices, cooled to a great extent. U.S. stocks markets have been operating in negative territory since mid-January due to market participants’ expectation of a hawkish Fed to combat mounting inflation. Moreover, the ongoing Russia-Ukraine war aggravated the situation as prices of several important commodities skyrocketed.
The Fed will raise the benchmark interest rate in next week’s FOMC, for the first time in three years. Fed Chairman Jerome Powell said that the magnitude of rate hike may increase further later this year if the central bank fails to combat inflation to an acceptable range. Consequently, the technology sector suffered the most as higher interest rates are detrimental to this high-growth sector.
Nevertheless, the recent market turmoil has made several U.S. corporate behemoths lucrative at the current market valuations. We have selected five semiconductor stocks with a favorable Zacks Rank, which should bolster one’s portfolio going forward. These are NVIDIA Corp., Advanced Micro Devices Inc., Analog Devices Inc., Qualcomm Inc. and Micron Technology Inc.
Strong Demand for Chipsets
The use of chipsets is increasing rapidly in various industries of the economy. From consumer electronics to automakers, high-tech computers, medical devices and fighter jet missile systems, are using chipsets. However, the coronavirus-induced breakdown of the global chipset supply-chain system has created a ruckus within the economy, resulting in soaring inflation across the world.
In January, the Biden administration reported that a global semiconductor shortage will persist until at least the second half of 2022. The report said “there is a significant, persistent mismatch in supply and demand for chips.” The report also stated that the median demand for chips was 17% higher in 2021 than 2019.
CNBC reported citing an analyst report of Euler Hermes that semiconductor sales are likely to exceed $600 billion for the first time in 2022, climbing 9% after soaring 26% to $553 billion in 2021. Gartner reported that in 2021, globally semiconductor companies incurred $146 billion as capital expenditure for building new production capacity and on R&D.
Several giant chipset manufacturers in the United States, Asia and Europe are ramping up capital spending creating new facilities for chipset production to cater to massive pent-up demand. The demand for chipsets will remain strong due to the complexity of new leading-edge technologies.
Future Catalyst for Semiconductor Industry
The White House has put pressure on U.S. Congress to quickly pass legislation to provide $52 billion to help computer chip manufacturers and ease the shortage of components vital for a range of industries.
The Biden administration has expressed concerns that the United States had a 37% share of the global semiconductor and microelectronic production in 1990, which has drastically dropped to just 12%. Consequently, U.S. businesses, especially the auto and high-tech industries are suffering from an acute shortage of chipsets owing to the breakdown of the global supply chain during the pandemic.
Our Top Picks
We have narrowed our search to five U.S. semiconductor giants (market capital > $50 billion) that are currently trading on the dip. These stocks have positive growth potential for 2022 and have witnessed solid earnings estimate revisions within the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NVIDIA is benefiting from the coronavirus-induced work and learn-at-home wave. NVIDIA is also benefiting from strong growth in GeForce desktop and notebook GPUs, which is boosting gaming revenues. Moreover, a surge in Hyperscale demand remains a tailwind for NVIDIA’s Data Center business.
The expansion of NVIDIA GeForce NOW is expected to drive its user base. Further, the solid uptake of AI-based smart cockpit infotainment solutions is a boon. The collaboration with Daimler-owned Mercedes-Benz is expected to strengthen NVIDIA’s presence in the autonomous vehicles and other automotive electronics spaces.
Zacks Rank #1 NVDA has an expected earnings growth rate of 25.2% for the current year (ending January 2023). The Zacks Consensus Estimate for current-year earnings has improved 7.8% over the last 30 days. NVIDIA is currently trading at a 33.6% discount from its 52-week high.
Advanced Micro Devices is riding on robust performance from the Computing and Graphics, and Enterprise Embedded and Semi-Custom segments. AMD is benefiting from the strong sales of its Ryzen and EPYC server processors, owing to the increasing proliferation of AI and Machine Learning in industries like cloud, gaming and supercomputing.
Growing clout of 7 nanometer products in the data center vertical, driven by work-from-home and online learning trends, is a key catalyst of Advanced Micro Devices. AMD has raised its 2021 guidance for revenues on the back of strong growth across all businesses.
Zacks Rank #1 Advanced Micro Devices has an expected earnings growth rate of 43% for the current year. The Zacks Consensus Estimate for current-year earnings improved 21.6% over the last 60 days. AMD is currently trading at a 32.5% discount from its 52-week high.
Analog Devices has strength across communication, consumer, industrial and automotive end-markets. Further, solid demand for high-performance analog and mixed-signal solutions was a tailwind. Growing momentum across the electric vehicle space on the back of robust Battery Management System solutions remains a positive for ADI.
Further, growing power design wins are the other positives for Analog Devices. The solid momentum of the HEV platform across cabin electronics ecosystem remains a tailwind for ADI. Moreover, Analog Devices remains optimistic about the growth prospects associated with its Maxim acquisition and 5G.
Zacks Rank #2 ADI has an expected earnings growth rate of 28.8% for the current year (ending October 2022). The Zacks Consensus Estimate for current-year earnings has improved 10.5% over the last 30 days. Analog Devices is currently trading at a 20% discount from its 52-week high.
Qualcomm is well-positioned to benefit from a solid 5G traction with greater visibility to meet its long-term revenue targets. For calendar-year 2022, 5G handsets with Qualcomm chips are expected to witness more than 40% year-over-year growth to 750 units.
Qualcomm has raised the bar for driverless cars with the launch of the first-of-its-kind automotive platform — Snapdragon Ride — which enables automakers to transform their vehicles into self-driving cars using AI.
Zacks Rank #2 Qualcomm has an expected earnings growth rate of 37.7% for the current year (ending September 2022). The Zacks Consensus Estimate for current-year earnings improved 12.1% over the last 60 days. QCOM is currently trading at an 18.8% discount from its 52-week high.
Micron Technology is witnessing growing demand for memory chips from cloud-computing providers and acceleration in 5G cellular network adoptions. The rising mix of high-value solutions, enhancement in customer engagement and improvement in cost structure are other growth drivers of MU.
Further, 5G adoption beyond mobile is likely to spur demand for memory and storage, particularly in Internet of Things devices and wireless infrastructure. These will act as major positives for Micron Technology going forward.
Zacks Rank #2 MU has an expected earnings growth rate of 47.7% for the current year (ending August 2022). The Zacks Consensus Estimate for current-year earnings improved 0.4% over the last 30 days. Micron Technology is currently trading at a 19.3% discount from its 52-week high.
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