Are these semiconductors stocks ready for big growth?
Semiconductor stocks have been the essential drivers for technology growth in the past decade, and considerably more so this year. Simply put, the tech sector continues to thrive because it owes its massive success in no small part to the semiconductor industry. And if we look at the PHLX Semiconductor Index, a cap-weighted semiconductor stocks, it is higher 17.3% year-to-date. Although most top semiconductor stocks fell along with the broader market during the coronavirus induced market sell-off, they have bounced back strongly.
While the industry is already hot, with Taiwan Semiconductor Manufacturing Company (TSM Stock Report) becoming the top 10 world’s most valuable company during the first half of 2020, analysts aren’t shy from saying semiconductor stocks can deliver second-half upside. As reported from CNBC:
Bank of America is bullish on chip stocks in the second half of 2020. The Wall Street firm says a group of semiconductor names have secular tailwinds, including artificial intelligence, 5G, cloud, and gaming. Plus, the chip stocks have strong balance sheets and solid free cash flow generation. Bank of America expects the group — which already has strong year-to-date performances — to continue its run-up.
Semiconductor Stocks Will Never Be Depleted. Here’s Why…
Currently, there is a lot of uncertainty in the market in the US and elsewhere. Of course, the earnings season is still underway, but we have already seen a strong showing in the tech sector. Yet, with some of the geopolitical tensions, there may be some short-term volatility. And this could affect semiconductor stocks as well, despite their mostly strong performance this year. Most top semiconductor stocks have reported earnings. These include Intel (INTC Stock Report) and Micron Technology (MU Stock Report), just to name a few. NVIDIA Corporation (NVDA Stock Report) is slated to report its earnings today. As the new technology, such as the internet of things (IoT), artificial intelligence (AI), autonomous driving, and 5G are constantly being developed, there are many reasons to be bullish on the future of the semiconductor industry.
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Top Semiconductor Stocks To Buy Right Now: Lam Research
Lam Research (LRCX Stock Report) may not be a notable name out there in the market, but it sure is a solid growth stock. Usually, companies either offer a strong dividend yield or growth in its stock price. However, in this case, Lam Research offers a pretty compelling combination of growth and dividends. Its solid return on invested capital makes it one of the best semiconductor stocks to buy right now. The company saw its machine sales growing despite the pandemic. Last quarter, machine sales rose 18.8% from a year ago. The foundry and logic segments have also done well. This came as 5G and artificial intelligence chips continue to be in demand.
Lam’s large installed bases have also proven beneficial. After all, they allow the company to keep track of data on defects. Perhaps you are curious about what the use of such data is. It turns out that Lam can sell the data to customers to allow them to improve yields. This is especially true for more complex and difficult processes. Customer support-related revenue went up 17% year over year.
This segment is now 33.2% of Lam’s revenue. While equipment sales can fluctuate from time to time, the service revenue tends to be growing more steadily over time. After all, the service has to grow with the installed base. And the recurring nature of service is a nice feature of the company’s income. With such strong prospects and dividend yield, would you add LRCX stock into your watchlist?
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Top Semiconductor Stocks To Buy Right Now: Qualcomm
Qualcomm (QCOM Stock Report) has recently petitioned the Trump administration to loosen some restrictions and allow it to sell its smartphone chips to Huawei. We don’t need an expert to tell us that the Huawei deal is huge. Apart from the company wanting to maintain a warm relationship with Huawei and the Chinese government, it also doesn’t want to risk losing its business to various Chinese smartphone makers and other semiconductor companies. Should the lobbying campaign be successful, investors shouldn’t be surprised to see another breakout in QCOM stock.
The company also reported its fiscal third-quarter last month. The company beat Wall Street’s estimates by $100 million with total revenue of $4.89 billion. From the fiscal report, Qualcomm also provided guidance for its next quarter with a prime focus on the global deployment of 5G.
Since Bernstein upgraded its rating for QCOM stock, the stock is gaining significant momentum and has erased its pandemic losses. Now that the stock is almost 26% higher year to date, could this rally continue into next week?