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Semiconductor stocks and ETFs have struggled over the past three months on bets over persistently higher rates. VanEck Vectors Semiconductor ETF (SMH - Free Report) , iShares Semiconductor ETF (SOXX - Free Report) , First Trust NASDAQ Semiconductor ETF (FTXL - Free Report) and Invesco PHLX Semiconductor ETF (SOXQ - Free Report) have plunged 9%, 10.9%, 8.8% and 10.7%, respectively, over the past three months. The weak trend might reverse in the weeks ahead as the Q3 earnings season unfolds.
The expansion of artificial intelligence (AI) applications holds the promise of ushering in fresh opportunities for growth within the sector. However, a potential decline in demand from data centers for web services and cloud computing providers is a headwind for the sector. Added to the weakness are geopolitical tension, trade wars and regulatory changes.
Semiconductor stocks saw a significant plunge after the United States announced a new round of restrictions aimed at thwarting China's access to advanced artificial intelligence chips and leading-edge semiconductor production equipment. The PHLX Semiconductor Sector index, a gauge comprising 30 chip stocks, shed about $73 billion in combined market value on Oct 17 trading session (read: Time for Semiconductor ETFs On Spike in July Sales?).
Some well-known players in the space, such as Texas Instruments (TXN - Free Report) , Intel (INTC - Free Report) , Qualcomm (QCOM - Free Report) , NVIDIA (NVDA - Free Report) and Advanced Micro Devices (AMD - Free Report) , will report earnings in the coming days. Let’s delve into the financial picture of the companies with a higher allocation in the abovementioned ETFs and see their power to move the funds up or down as Q3 earnings unfold. SMH is largely concentrated on these four firms with a combined share of 37.1%, followed by 36.3% for SOXQ, 33.1% for FTXL and 32.7% for SOXX.
Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Inside Our Earnings Prediction
Texas Instruments is set to report on Oct 24, after market close. It has an Earnings ESP of -0.59% and a Zacks Rank #4. The stock saw negative earnings estimate revision of a penny over the past 30 days for the to-be-reported quarter. The earnings surprise track over the last four quarters has been good, with the beat being 5.85%, on average.
Intel has an Earnings ESP of +12.98% and a Zacks Rank #2. The stock saw a positive earnings estimate revision by a penny over the past 30 days for the to-be-reported quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. Intel delivered an earnings surprise of 130.88%, on average, for the preceding four quarters. It is slated to release earnings after market close on Oct 26.
Qualcomm has an Earnings ESP of +5.37% and a Zacks Rank #3. The company witnessed positive earnings estimate revision of a penny over the past 30 days for the to-be-reported quarter and delivered an earnings surprise of 1.01% in the trailing four quarters, on average. The company is slated to report earnings after the closing bell on Nov 1 (see: all the Technology ETFs here).
Nvidia currently has an Earnings ESP of +6.93% and a Zacks Rank #1. This videogame-gear specialist saw positive earnings estimate revision of a couple of cents over the past 30 days for the third quarter of fiscal 2024. Nvidia’s earnings surprise history is good as it delivered an earnings surprise of 9.79%, on average, in the last four quarters. Nvidia is slated to report on Nov 15.
Advanced Micro Devices has an Earnings ESP of 0.00% and a Zacks Rank #3. Its earnings surprise history is impressive, with the average beat being 3.36% for the preceding four quarters. The stock witnessed no earnings estimate revision over the past 30 days for the quarter to be reported. AMD is slated to report earnings on Oct 31 after the closing bell.
Conclusion
Most companies are expected to deliver a surprise this earnings season. Semiconductor ETFs might see smooth trading in the weeks ahead as SOXX, SMH, FTXL and SOXQ have a Zacks ETF Rank #1 each. This suggests their outperformance in the weeks ahead.
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Semiconductor ETFs in Focus Ahead of Q3 Earnings
Semiconductor stocks and ETFs have struggled over the past three months on bets over persistently higher rates. VanEck Vectors Semiconductor ETF (SMH - Free Report) , iShares Semiconductor ETF (SOXX - Free Report) , First Trust NASDAQ Semiconductor ETF (FTXL - Free Report) and Invesco PHLX Semiconductor ETF (SOXQ - Free Report) have plunged 9%, 10.9%, 8.8% and 10.7%, respectively, over the past three months. The weak trend might reverse in the weeks ahead as the Q3 earnings season unfolds.
The expansion of artificial intelligence (AI) applications holds the promise of ushering in fresh opportunities for growth within the sector. However, a potential decline in demand from data centers for web services and cloud computing providers is a headwind for the sector. Added to the weakness are geopolitical tension, trade wars and regulatory changes.
Semiconductor stocks saw a significant plunge after the United States announced a new round of restrictions aimed at thwarting China's access to advanced artificial intelligence chips and leading-edge semiconductor production equipment. The PHLX Semiconductor Sector index, a gauge comprising 30 chip stocks, shed about $73 billion in combined market value on Oct 17 trading session (read: Time for Semiconductor ETFs On Spike in July Sales?).
Some well-known players in the space, such as Texas Instruments (TXN - Free Report) , Intel (INTC - Free Report) , Qualcomm (QCOM - Free Report) , NVIDIA (NVDA - Free Report) and Advanced Micro Devices (AMD - Free Report) , will report earnings in the coming days. Let’s delve into the financial picture of the companies with a higher allocation in the abovementioned ETFs and see their power to move the funds up or down as Q3 earnings unfold. SMH is largely concentrated on these four firms with a combined share of 37.1%, followed by 36.3% for SOXQ, 33.1% for FTXL and 32.7% for SOXX.
Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Inside Our Earnings Prediction
Texas Instruments is set to report on Oct 24, after market close. It has an Earnings ESP of -0.59% and a Zacks Rank #4. The stock saw negative earnings estimate revision of a penny over the past 30 days for the to-be-reported quarter. The earnings surprise track over the last four quarters has been good, with the beat being 5.85%, on average.
Intel has an Earnings ESP of +12.98% and a Zacks Rank #2. The stock saw a positive earnings estimate revision by a penny over the past 30 days for the to-be-reported quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. Intel delivered an earnings surprise of 130.88%, on average, for the preceding four quarters. It is slated to release earnings after market close on Oct 26.
Qualcomm has an Earnings ESP of +5.37% and a Zacks Rank #3. The company witnessed positive earnings estimate revision of a penny over the past 30 days for the to-be-reported quarter and delivered an earnings surprise of 1.01% in the trailing four quarters, on average. The company is slated to report earnings after the closing bell on Nov 1 (see: all the Technology ETFs here).
Nvidia currently has an Earnings ESP of +6.93% and a Zacks Rank #1. This videogame-gear specialist saw positive earnings estimate revision of a couple of cents over the past 30 days for the third quarter of fiscal 2024. Nvidia’s earnings surprise history is good as it delivered an earnings surprise of 9.79%, on average, in the last four quarters. Nvidia is slated to report on Nov 15.
Advanced Micro Devices has an Earnings ESP of 0.00% and a Zacks Rank #3. Its earnings surprise history is impressive, with the average beat being 3.36% for the preceding four quarters. The stock witnessed no earnings estimate revision over the past 30 days for the quarter to be reported. AMD is slated to report earnings on Oct 31 after the closing bell.
Conclusion
Most companies are expected to deliver a surprise this earnings season. Semiconductor ETFs might see smooth trading in the weeks ahead as SOXX, SMH, FTXL and SOXQ have a Zacks ETF Rank #1 each. This suggests their outperformance in the weeks ahead.