The new normal, with its growing dependence on technology during the COVID-19 pandemic, has done wonders for the semiconductor industry. Advanced chipsets, which power IT products and devices, have seen heavy demand—and not just for consumer electronics; demand for processors is emanating from segments including electric vehicles, 5G, and cloud computing.
As one of the world’s leading chipmakers, Nvidia Inc. (NVDA) has witnessed strong demand in the GPU space amid the pandemic. During the fourth quarter, ended January 31, NVDA’s revenue climbed 61% year-over-year to $5 billion and exceeded analyst expectations. Investors were also hopeful that the company would gain from selling cryptocurrency-oriented cards to industrial miners.
However, NVDA’s CEO Jensen Huang downplayed the company's cryptocurrency activity, noting that, “We expect that to be a small part of our business as we go forward.” Also, the company’s $40 billion ARM acquisition is being scrutinized by the European Union and the U.K. Hence, NVDA has a level of uncertainty surrounding it.
Therefore, we think investors seeking to extract gains from semiconductor stocks should look at companies such as Intel Corporation (INTC), Micron Technology, Inc. (MU), and Skyworks Solutions, Inc. (SWKS) that have clearer growth prospects. These stocks performed consistently well last year and could outdo NVDA through the remainder of this year.
Intel Corporation (INTC)
INTC is a global semiconductor leader that develops and markets solutions for the cloud, smart, and connected devices for retail, industrial, and consumer uses. DCG, IOTG, Mobileye, NSG, PSG, CCG are the segments in which the company operates. The company also provides Internet of Things (IoT) products that include high-performance computing solutions for targeted verticals and embedded applications.
During the fourth quarter, ended December 31, 2020, INTC’s revenue fell 1% year-over-year to $20 billion. Its EPS for the quarter declined to $1.42 from $1.58 posted in the same period last year. INTC’s data-centric business unit’s revenue declined 11% year-over-year, while its PC-centric business climbed 9% to $10.9 billion. The company has begun production of 10nm-based 3rd Gen Intel® Xeon® Scalable processors (“Ice Lake”). It has also ventured into the discrete graphics market with Intel® Iris® Xe MAX graphics, its first Xe-based discrete GPU.
Analysts expect the company’s revenue for the quarter ending March 31, 2021 to be $17.5 billion, representing an 11.5% year-over-year decline. Its EPS is likely to grow at the rate of 5.4% per annum over the next five years.
INTC has climbed 26% on a year-to-date basis to close yesterday’s trading session at $61.24. Over the past six months, the stock gained 23.8%.
INTC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
INTC has an A grade for Value and Quality, and a B grade for Sentiment and Momentum. Of the 99 stocks in the B-rated Semiconductor & Wireless Chip industry, it is ranked #15.
In addition to the POWR Ratings grades I've just highlighted, you can see INTC ratings for Growth and Stability, here.
Micron Technology, Inc. (MU)
MU is involved in designing, manufacturing, and selling memory and storage products globally. Its Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit are the four segments through which the company operates. Memory products for the cloud server, client, graphics, enterprise, and networking markets, are some of the products that MU produces.
In February, MU announced the appointment of Linnie Haynesworth to its board of directors. Haynesworth brings in more than 30 years of experience in technology, including aerospace and cybersecurity.
During the first quarter, ended December 2020, MU’s revenue climbed 12.2% year-over-year to $5.8 billion, driven by DRAM and NAND technologies. Its EPS for the quarter climbed to $0.71 from $0.43 posted in the same period last year. MU ended the quarter with cash and cash equivalents of $8.36 billion.
Analysts expect MU’s revenue for the quarter ending February 28 to be $5.8 billion, representing a 22.2% year-over-year increase. Its EPS is expected to grow at the rate of 25.1% per annum over the next five years.
MU ended yesterday’s trading session at $91.09, advancing 26% year-to-date. During the past six months, MU rallied 107.1%.
MU’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has a B for Momentum, Value and Sentiment. It is ranked #38 in the Semiconductor & Wireless Chip industry.
In total, we rate MU on eight different levels. Beyond what we’ve stated above we have also given MU grades for Stability, Growth, and Quality. Get all the MU ratings here.
Skyworks Solutions, Inc. (SWKS)
SWKS is involved in designing, developing, manufacturing, and selling proprietary semiconductor products in the U.S. , China, South Korea, Taiwan, Africa and Europe. The company’s product portfolio includes amplifiers, antenna tuners, attenuators, demodulators, detectors, and diodes.
During the fourth quarter, ended October 2, 2020, SWKS’s revenue climbed 16% year-over-year to $957 million. Its EPS for the quarter declined to $1.46 from $1.85 posted in the prior year period. Its president and CEO, Liam K. Griffin, stated, “With 5G technology launches now well under way, we are ramping our innovative Sky5® solutions in a rapidly expanding set of end markets, from mobile to IoT, automotive and wireless infrastructure.”
A consensus revenue estimate for the quarter ending March 31, 2021 is $1.2 billion, representing a 50.3% increase year-over-year. Meanwhile, its EPS is likely to increase 75.4% to $2.35.
Year-to-date, SWKS gained 22% to end yesterday’s trading session at $179.9. Over the past six months, the stock has climbed 27.3%.
SWKS’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. SWKS has a Growth, Sentiment, and Quality Grade of B. In the Semiconductor & Wireless Chip industry, it is ranked #14.
Click here to see the additional POWR Ratings for SWKS (Stability, Momentum and Value).
Want More Great Investing Ideas?
INTC shares were trading at $60.98 per share on Wednesday afternoon, down $0.26 (-0.42%). Year-to-date, INTC has gained 23.87%, versus a 3.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.3 Semiconductor Stocks Outperforming NVIDIA in 2021 appeared first on StockNews.com