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Forget Micron, Invest in These Semiconductor Stocks Instead
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It seems that memory chipmaker Micron Technology Inc. (MU - Free Report) is in troubled waters. For the second straight quarter now, the company has failed to report acceptable earnings results.
What Happened Last Quarter
The recently-reported third-quarter 2016 numbers were disappointing to say the least, with both its top and bottom line declining on a year-over-year basis.
The company’s quarterly revenues fell 24.8% to $2.898 billion. The reported number also lagged the Zacks Consensus Estimate of $2.949 billion. The year-over-year decline was primarily due to softness in the PC segment. Also, pricing pressure in client SSD and lower-than-expected sales of trade Non-Volatile products hurt the top line.
On the other hand, the company reported adjusted loss per share of 8 cents. In the year-ago quarter, it had posted earnings of 54 cents. However, the figure was narrower than the Zacks Consensus Estimate of a loss of 11 cents.
These results marked the second successive quarter of Micron reporting a loss. Making things worse, the company now anticipates this trend to continue in the next quarter as well. For the fourth quarter, the company expects a loss of 16–24 cents per share.
Micron’s revenue projections for the quarter were weak too. The company projects revenues in the range of $2.9 billion to $3.2 billion, representing a year-over-year decline of 11–19%.
The company cited softness in PC market and pricing pressure in the client SSD segment as the main reasons for a weak fourth-quarter 2016 outlook.
However, Micron is not sitting on its hands. To counter the current market conditions, the company recently unveiled a restructuring plan, which includes a reduction in its headcount.
The company hopes to save approximately $320 million in fiscal 2017 through these restructuring initiatives. According to Chief Executive Officer Mark Durcan, it will also “drive greater efficiencies and increase focus on our strategic priorities.”
While these measures seem impressive at first glance, it could be a while before they start paying off. So for now, it is advisable to steer clear of Micron.
Our Picks
Obviously, nothing on Micron's side inspires confidence in the stock at the moment. Nevertheless, the semiconductor market still has a few promising stocks to offer. Based on growth, valuation, earnings data and the top Zacks Rank, we have picked three stocks that have the potential to yield solid returns over the next 1–3 months.
NVIDIA Corporation designs, develops and markets an array of award-winning 3D graphics processors, graphics processing units and related software that set the standard for performance, quality and features for every type of desktop computer user, ranging from professional workstations to low-cost computers.
The company has an Expected EPS growth rate of 24.7% for fiscal 2017. The stock has a forward P/E of 29.9x.
With a Zacks Rank #2 (Buy), this stock has an impressive history of earnings beats. NVIDIA has surpassed the Zacks Consensus Estimate in all of the four preceding quarters, with an average positive surprise of 57.89%. Moreover, the company has witnessed upward estimate revisions for both the second quarter and fiscal 2017 over the last 60 days.
Intel Corporation is one of the world's largest semiconductor chip maker. The company develops advanced integrated digital technology products, primarily integrated circuits, for industries such as computing and communications.
The company has an Expected Long-term EPS growth rate of 8.10%. The stock has a forward P/E of 13.5x, which is much lower than the industry average of 15.8x.
This Zacks Rank #2 stock has a solid track record too. Intel has surpassed the Zacks Consensus Estimate in all of the trailing four quarters, with an average positive surprise of 11.53%.
Semtech designs, manufactures and markets a wide range of analog and mixed- signal semiconductors, including Standard Semiconductor Products, Rectifier and Assembly Products and Other Products. The company's devices are used in a variety of applications including computer, communications, industrial, military-aerospace and automotive.
The company has an Expected EPS growth rate of 71% for fiscal 2017. The stock has a forward P/E of 22.3x.
The company carries a Zacks Rank #2 and it has a decent history of earnings beats. Semtech surpassed the Zacks Consensus Estimate thrice in the past four quarters, averaging a positive surprise of 18.50%. The company has also witnessed upward estimate revisions for both the second quarter and fiscal 2017 over the last 60 days.
Looking Ahead
These stocks have managed to grab the spotlight with their remarkable performances, supported by solid earnings results and strong growth projections. Bearing this in mind, we believe parking your money in these stocks would yield high returns in the short term.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Forget Micron, Invest in These Semiconductor Stocks Instead
It seems that memory chipmaker Micron Technology Inc. (MU - Free Report) is in troubled waters. For the second straight quarter now, the company has failed to report acceptable earnings results.
What Happened Last Quarter
The recently-reported third-quarter 2016 numbers were disappointing to say the least, with both its top and bottom line declining on a year-over-year basis.
The company’s quarterly revenues fell 24.8% to $2.898 billion. The reported number also lagged the Zacks Consensus Estimate of $2.949 billion. The year-over-year decline was primarily due to softness in the PC segment. Also, pricing pressure in client SSD and lower-than-expected sales of trade Non-Volatile products hurt the top line.
On the other hand, the company reported adjusted loss per share of 8 cents. In the year-ago quarter, it had posted earnings of 54 cents. However, the figure was narrower than the Zacks Consensus Estimate of a loss of 11 cents.
These results marked the second successive quarter of Micron reporting a loss. Making things worse, the company now anticipates this trend to continue in the next quarter as well. For the fourth quarter, the company expects a loss of 16–24 cents per share.
Micron’s revenue projections for the quarter were weak too. The company projects revenues in the range of $2.9 billion to $3.2 billion, representing a year-over-year decline of 11–19%.
The company cited softness in PC market and pricing pressure in the client SSD segment as the main reasons for a weak fourth-quarter 2016 outlook.
Reflecting investor sentiments about the dismal third-quarter fiscal 2016 results and weak outlook for the upcoming quarter, shares of the memory chipmaker crashed over 9% last Friday.
Turnaround Efforts
However, Micron is not sitting on its hands. To counter the current market conditions, the company recently unveiled a restructuring plan, which includes a reduction in its headcount.
The company hopes to save approximately $320 million in fiscal 2017 through these restructuring initiatives. According to Chief Executive Officer Mark Durcan, it will also “drive greater efficiencies and increase focus on our strategic priorities.”
While these measures seem impressive at first glance, it could be a while before they start paying off. So for now, it is advisable to steer clear of Micron.
Our Picks
Obviously, nothing on Micron's side inspires confidence in the stock at the moment. Nevertheless, the semiconductor market still has a few promising stocks to offer. Based on growth, valuation, earnings data and the top Zacks Rank, we have picked three stocks that have the potential to yield solid returns over the next 1–3 months.
NVIDIA Corporation (NVDA - Free Report)
NVIDIA Corporation designs, develops and markets an array of award-winning 3D graphics processors, graphics processing units and related software that set the standard for performance, quality and features for every type of desktop computer user, ranging from professional workstations to low-cost computers.
The company has an Expected EPS growth rate of 24.7% for fiscal 2017. The stock has a forward P/E of 29.9x.
With a Zacks Rank #2 (Buy), this stock has an impressive history of earnings beats. NVIDIA has surpassed the Zacks Consensus Estimate in all of the four preceding quarters, with an average positive surprise of 57.89%. Moreover, the company has witnessed upward estimate revisions for both the second quarter and fiscal 2017 over the last 60 days.
Intel Corporation (INTC - Free Report)
Intel Corporation is one of the world's largest semiconductor chip maker. The company develops advanced integrated digital technology products, primarily integrated circuits, for industries such as computing and communications.
The company has an Expected Long-term EPS growth rate of 8.10%. The stock has a forward P/E of 13.5x, which is much lower than the industry average of 15.8x.
This Zacks Rank #2 stock has a solid track record too. Intel has surpassed the Zacks Consensus Estimate in all of the trailing four quarters, with an average positive surprise of 11.53%.
Semtech Corporation (SMTC - Free Report)
Semtech designs, manufactures and markets a wide range of analog and mixed- signal semiconductors, including Standard Semiconductor Products, Rectifier and Assembly Products and Other Products. The company's devices are used in a variety of applications including computer, communications, industrial, military-aerospace and automotive.
The company has an Expected EPS growth rate of 71% for fiscal 2017. The stock has a forward P/E of 22.3x.
The company carries a Zacks Rank #2 and it has a decent history of earnings beats. Semtech surpassed the Zacks Consensus Estimate thrice in the past four quarters, averaging a positive surprise of 18.50%. The company has also witnessed upward estimate revisions for both the second quarter and fiscal 2017 over the last 60 days.
Looking Ahead
These stocks have managed to grab the spotlight with their remarkable performances, supported by solid earnings results and strong growth projections. Bearing this in mind, we believe parking your money in these stocks would yield high returns in the short term.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>