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Year-to-date, volatility has headlined the market, and it’s been challenging to be an investor trying to sail through these rough waters as the market struggles to find a direction.
However, the forecast seems to be clearing up. The market rallied significantly last week and provided investors with the best weekly performance since last November. Stocks have pulled back slightly this week, but it feels like overall market sentiment is much more positive than it has been.
Amid returning market strength, many stocks provide serious upside after slashed valuations. Semiconductor companies, which have been some of the most exciting stocks in the market over the last couple of years, provide exactly that. Let’s look at three chip stocks I believe provide substantial upside amid a higher bullish market sentiment.
ON Semiconductor Corporation
ON Semiconductor Corporation (ON - Free Report) is a leading semiconductor manufacturer with over 80,000 different parts and a global supply chain reaching thousands of customers. Year-to-date, shares of the company have slid 11%, underperforming the S&P 500. The decline has caused ON’s forward earnings multiple to decrease to 14.9X, much lower than its high of 42.6X in 2020 and its high of 25.4X this year.
Analysts have been rapidly revising their estimates upwards over the last 60 days, boosting the Zacks Consensus Estimate for next quarter by 27% to $1.04 per share and 25% to $1.05 per share for the following quarter. Full-year earnings estimates have also increased substantially, surging 27% to $4.16 per share for the current year and nearly 40% to $4.44 per share for 2023.
Image Source: Zacks Investment Research
The company has displayed consistent earnings growth over the last four quarters, beating estimates each time and acquiring a four-quarter average EPS surprise of 16%. Looking back even further, the company hasn’t had an EPS miss since May 2020, and in its latest quarter, ON exceeded expectations by nearly 16%. Furthermore, the current year’s consensus EPS estimate reflects year-over-year earnings growth of almost 42%.
ON Semiconductor Corporation Price, Consensus and EPS Surprise
The Zacks Consensus Sales Estimate for the current year is forecasting a year-over-year top-line increase of nearly 14%, and the company currently sports a Zacks Rank #1 (Strong Buy) with an A Style Score for Growth. Additionally, the company has received 37 upwards estimate revisions over the last 60 days, and the forward earnings multiple has declined to an attractive level. These are all reasons why I believe that ON is a chip stock that investors should consider.
Analog Devices, Inc
Analog Devices, Inc. (ADI - Free Report) is a worldwide leader in designing and manufacturing high-performance analog, mixed-signal, and digital signal processing integrated circuits. The company’s shares have declined nearly 10% year-to-date and have underperformed the general market. ADI’s forward earnings multiple of 19.8X is much lower than its high of 29.2X in 2020 and considerably lower than its high of 23.5X this year.
Upwards estimate revisions have been coming in left and right for the company over the last 60 days, boosting the Zacks Consensus Estimate across all time frames. 18 upwards estimate revisions have increased the consensus estimate trend 12% to $2.08 per share for Q2 and 11.5% to $2.14 per share for Q3. Current full-year earnings estimates have increased by 10% to $8.32 per share, while next year’s consensus estimate has increased by 8.7% to $8.99 per share.
Image Source: Zacks Investment Research
Impressively, the company has exceeded earnings expectations nine quarters in a row dating back to February 2020, and in its latest quarter, it beat estimates by 8%. The chip provider's four-quarter trailing average is a solid 8.4%, and the current year’s consensus EPS estimate reflects year-over-year earnings growth of nearly 30%.
Analog Devices, Inc. Price, Consensus and EPS Surprise
The Zacks Consensus Sales Estimate is forecasting a year-over-year sales increase of a remarkable 54%, and the company currently boasts a Zacks Rank #2 (Buy) with a B Style Score for Growth. Like many stocks, ADI has had a bumpy 2022 so far, but this provides a much cheaper opportunity to buy shares at a lower valuation. After pairing the above metrics with its rapidly increasing consensus estimate trend, I believe that ADI would be a great addition to your portfolio.
Advanced Micro Devices
Advanced Micro Devices (AMD - Free Report) is a global company specializing in manufacturing semiconductor devices used in computer processing. AMD shares have declined 20% year-to-date, vastly underperforming the S&P 500 and causing its forward earnings multiple to decrease substantially to 30.9X, a much lower value than its high of 67.8X last November.
Similar to ADI and ON, the chip supplier has received many upwards estimate revisions over the last 60 days. The consensus estimate trend for the next quarter has surged 34% to $0.91 per share, and for the following quarter, it has increased 27% to $0.94 per share. AMD’s current full-year consensus earnings estimate has jumped 22% to $3.99 per share, and next year’s earnings estimate has increased 21%, reflecting full-year EPS of $4.76.
Image Source: Zacks Investment Research
AMD is currently on a blazing-hot earnings streak, chaining together seven consecutive EPS beats dating back to June 2020. In its latest quarter, the chip giant beat estimates by nearly 23%, and the average earnings surprise over the last four quarters is an impressive 17%. Additionally, the current year’s consensus EPS estimate reflects a stellar 43% year-over-year earnings growth.
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
Current full-year sales are expected to grow to $21.5 billion, a 30% increase year-over-year, and the company is currently a Zacks Rank #1 (Strong Buy) with a B Style Score for Growth. AMD has established itself as a cutting-edge chip manufacturer, clearly seen within its rapidly increasing consensus estimate trend and consistent earnings growth. Additionally, AMD’s forward earnings multiple has declined into a sweet spot for investors. For these reasons, I believe that AMD shares should be on investors’ shortlists.
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3 Chip Stocks Investors Shouldn't Ignore
Year-to-date, volatility has headlined the market, and it’s been challenging to be an investor trying to sail through these rough waters as the market struggles to find a direction.
However, the forecast seems to be clearing up. The market rallied significantly last week and provided investors with the best weekly performance since last November. Stocks have pulled back slightly this week, but it feels like overall market sentiment is much more positive than it has been.
Amid returning market strength, many stocks provide serious upside after slashed valuations. Semiconductor companies, which have been some of the most exciting stocks in the market over the last couple of years, provide exactly that. Let’s look at three chip stocks I believe provide substantial upside amid a higher bullish market sentiment.
ON Semiconductor Corporation
ON Semiconductor Corporation (ON - Free Report) is a leading semiconductor manufacturer with over 80,000 different parts and a global supply chain reaching thousands of customers. Year-to-date, shares of the company have slid 11%, underperforming the S&P 500. The decline has caused ON’s forward earnings multiple to decrease to 14.9X, much lower than its high of 42.6X in 2020 and its high of 25.4X this year.
Analysts have been rapidly revising their estimates upwards over the last 60 days, boosting the Zacks Consensus Estimate for next quarter by 27% to $1.04 per share and 25% to $1.05 per share for the following quarter. Full-year earnings estimates have also increased substantially, surging 27% to $4.16 per share for the current year and nearly 40% to $4.44 per share for 2023.
Image Source: Zacks Investment Research
The company has displayed consistent earnings growth over the last four quarters, beating estimates each time and acquiring a four-quarter average EPS surprise of 16%. Looking back even further, the company hasn’t had an EPS miss since May 2020, and in its latest quarter, ON exceeded expectations by nearly 16%. Furthermore, the current year’s consensus EPS estimate reflects year-over-year earnings growth of almost 42%.
ON Semiconductor Corporation Price, Consensus and EPS Surprise
ON Semiconductor Corporation price-consensus-eps-surprise-chart | ON Semiconductor Corporation Quote
The Zacks Consensus Sales Estimate for the current year is forecasting a year-over-year top-line increase of nearly 14%, and the company currently sports a Zacks Rank #1 (Strong Buy) with an A Style Score for Growth. Additionally, the company has received 37 upwards estimate revisions over the last 60 days, and the forward earnings multiple has declined to an attractive level. These are all reasons why I believe that ON is a chip stock that investors should consider.
Analog Devices, Inc
Analog Devices, Inc. (ADI - Free Report) is a worldwide leader in designing and manufacturing high-performance analog, mixed-signal, and digital signal processing integrated circuits. The company’s shares have declined nearly 10% year-to-date and have underperformed the general market. ADI’s forward earnings multiple of 19.8X is much lower than its high of 29.2X in 2020 and considerably lower than its high of 23.5X this year.
Upwards estimate revisions have been coming in left and right for the company over the last 60 days, boosting the Zacks Consensus Estimate across all time frames. 18 upwards estimate revisions have increased the consensus estimate trend 12% to $2.08 per share for Q2 and 11.5% to $2.14 per share for Q3. Current full-year earnings estimates have increased by 10% to $8.32 per share, while next year’s consensus estimate has increased by 8.7% to $8.99 per share.
Image Source: Zacks Investment Research
Impressively, the company has exceeded earnings expectations nine quarters in a row dating back to February 2020, and in its latest quarter, it beat estimates by 8%. The chip provider's four-quarter trailing average is a solid 8.4%, and the current year’s consensus EPS estimate reflects year-over-year earnings growth of nearly 30%.
Analog Devices, Inc. Price, Consensus and EPS Surprise
Analog Devices, Inc. price-consensus-eps-surprise-chart | Analog Devices, Inc. Quote
The Zacks Consensus Sales Estimate is forecasting a year-over-year sales increase of a remarkable 54%, and the company currently boasts a Zacks Rank #2 (Buy) with a B Style Score for Growth. Like many stocks, ADI has had a bumpy 2022 so far, but this provides a much cheaper opportunity to buy shares at a lower valuation. After pairing the above metrics with its rapidly increasing consensus estimate trend, I believe that ADI would be a great addition to your portfolio.
Advanced Micro Devices
Advanced Micro Devices (AMD - Free Report) is a global company specializing in manufacturing semiconductor devices used in computer processing. AMD shares have declined 20% year-to-date, vastly underperforming the S&P 500 and causing its forward earnings multiple to decrease substantially to 30.9X, a much lower value than its high of 67.8X last November.
Similar to ADI and ON, the chip supplier has received many upwards estimate revisions over the last 60 days. The consensus estimate trend for the next quarter has surged 34% to $0.91 per share, and for the following quarter, it has increased 27% to $0.94 per share. AMD’s current full-year consensus earnings estimate has jumped 22% to $3.99 per share, and next year’s earnings estimate has increased 21%, reflecting full-year EPS of $4.76.
Image Source: Zacks Investment Research
AMD is currently on a blazing-hot earnings streak, chaining together seven consecutive EPS beats dating back to June 2020. In its latest quarter, the chip giant beat estimates by nearly 23%, and the average earnings surprise over the last four quarters is an impressive 17%. Additionally, the current year’s consensus EPS estimate reflects a stellar 43% year-over-year earnings growth.
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
Advanced Micro Devices, Inc. price-consensus-eps-surprise-chart | Advanced Micro Devices, Inc. Quote
Current full-year sales are expected to grow to $21.5 billion, a 30% increase year-over-year, and the company is currently a Zacks Rank #1 (Strong Buy) with a B Style Score for Growth. AMD has established itself as a cutting-edge chip manufacturer, clearly seen within its rapidly increasing consensus estimate trend and consistent earnings growth. Additionally, AMD’s forward earnings multiple has declined into a sweet spot for investors. For these reasons, I believe that AMD shares should be on investors’ shortlists.