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Semiconductor stocks have been the subject of volatility so far this year, but the underlying business of this industry is growing—and should continue that trend in 2018 and beyond. Throughout the chip-making space, companies have successfully adapted to the changing needs of the consumer, including an increased demand for small, high-powered chips that enable “Internet of Things” (IoT) devices.
For those that don’t know, the Internet of Things is the growing world of interconnected household and industrial devices. Everyday products and machines can now be embedded with sensor technology to process data or interact with other electronic devices.
For example, consumer-level IoT products include things like Amazon’s (AMZN - Free Report) Echo “smart speaker,” wearable motion and activity tracking products, and advanced in-car technology. On the commercial side of the IoT market, industrial manufacturers have begun implementing sensors into machines to track performance and efficiency.
As demand for the microchips that power these IoT devices continues to grow, semiconductor manufacturers with a focus on IoT products will continue to benefit. And 2018 promises to be another marquee year for these suppliers, with the number of connected devices worldwide set to continue its rapid growth.
With that said, we’ve found three already-strong stocks that are looking to benefit even more from further IoT growth in 2018:
Vishay Intertechnology is a global manufacturer and supplier of discrete semiconductors. The company has a broad portfolio of unique passive and active solutions that are tailored to the “things” being controlled in the IoT. Vishay markets its portfolio to manufacturers of everything from biometric monitoring systems to fitbands and smart appliances.
VSH is currently a Zacks Rank #1 (Strong Buy). The stock is solid growth option, with earnings and revenue expected to improve by 40 and 16%, respectively, this year. But VSH is also reasonably priced, and the stock’s P/E of 11.3 and PEG of 1.2 show that investors are getting a great bargain on its current outlook.
Shares dipped as investors shrugged their shoulders at Vishay’s latest earnings beat, but the stock has seemed to bottom out and could be sitting at a great buy point right now.
2. Cypress Semiconductor
Cypress Semiconductor is a leading provider of high-performance digital and mixed-signal integrated circuits. The company has also emerged as a leader in the Internet of Things industry after shelling out $550 million for Broadcom’s IoT business in 2016. Cypress’ “WICED” IoT platform is part of one of the largest such portfolios in the industry.
Cypress has been an up-and-down stock throughout 2018, but we are looking for shares to start reacting to the company’s improving earnings outlook soon. The firm has witnessed eight positive revisions to its full-year EPS estimates within the past 30 days, and that type of sentiment is normally met with share price momentum.
Other reasons to like Cypress include its Zacks Rank #1 (Strong Buy) and “A” grade for Growth in our Style Scores system. The company also pays out a healthy 2.8% dividend.
ON Semiconductor has traditionally been known as a power management and commodity chip maker, but the company has started to carve out a budding IoT division. ON is now heavily involved with automotive solutions, and its IoT offerings also include products catered to wearables, smart city development, and industrial automation.
ON is currently a Zacks Rank #2 (Buy) and has emerged as an interesting earnings growth pick, with EPS totals expected to improve by 26% this year and over 13% on a long-term, annualized basis. Meanwhile, the stock is trading at just 11x forward 12-month earnings and sports a PEG ratio of just 0.8.
Bottom Line
The Internet of Things is one of the most exciting emerging tech markets in the world. And while these specific products are interesting, the real moneymakers in these situations are the companies that are building the tech that powers these products.
The best way for investors to cash in on this growing trend is to identify companies that are not only investing in the Internet of Things, but are also displaying solid fundamentals and impressive Zacks metrics.
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Image: Bigstock
3 "Internet of Things" Stocks to Buy Right Now
Semiconductor stocks have been the subject of volatility so far this year, but the underlying business of this industry is growing—and should continue that trend in 2018 and beyond. Throughout the chip-making space, companies have successfully adapted to the changing needs of the consumer, including an increased demand for small, high-powered chips that enable “Internet of Things” (IoT) devices.
For those that don’t know, the Internet of Things is the growing world of interconnected household and industrial devices. Everyday products and machines can now be embedded with sensor technology to process data or interact with other electronic devices.
For example, consumer-level IoT products include things like Amazon’s (AMZN - Free Report) Echo “smart speaker,” wearable motion and activity tracking products, and advanced in-car technology. On the commercial side of the IoT market, industrial manufacturers have begun implementing sensors into machines to track performance and efficiency.
(Also Read: How to Invest in the "Internet of Things")
As demand for the microchips that power these IoT devices continues to grow, semiconductor manufacturers with a focus on IoT products will continue to benefit. And 2018 promises to be another marquee year for these suppliers, with the number of connected devices worldwide set to continue its rapid growth.
With that said, we’ve found three already-strong stocks that are looking to benefit even more from further IoT growth in 2018:
1. Vishay Intertechnology, Inc. (VSH - Free Report)
Vishay Intertechnology is a global manufacturer and supplier of discrete semiconductors. The company has a broad portfolio of unique passive and active solutions that are tailored to the “things” being controlled in the IoT. Vishay markets its portfolio to manufacturers of everything from biometric monitoring systems to fitbands and smart appliances.
VSH is currently a Zacks Rank #1 (Strong Buy). The stock is solid growth option, with earnings and revenue expected to improve by 40 and 16%, respectively, this year. But VSH is also reasonably priced, and the stock’s P/E of 11.3 and PEG of 1.2 show that investors are getting a great bargain on its current outlook.
Shares dipped as investors shrugged their shoulders at Vishay’s latest earnings beat, but the stock has seemed to bottom out and could be sitting at a great buy point right now.
2. Cypress Semiconductor
Cypress Semiconductor is a leading provider of high-performance digital and mixed-signal integrated circuits. The company has also emerged as a leader in the Internet of Things industry after shelling out $550 million for Broadcom’s IoT business in 2016. Cypress’ “WICED” IoT platform is part of one of the largest such portfolios in the industry.
Cypress has been an up-and-down stock throughout 2018, but we are looking for shares to start reacting to the company’s improving earnings outlook soon. The firm has witnessed eight positive revisions to its full-year EPS estimates within the past 30 days, and that type of sentiment is normally met with share price momentum.
Other reasons to like Cypress include its Zacks Rank #1 (Strong Buy) and “A” grade for Growth in our Style Scores system. The company also pays out a healthy 2.8% dividend.
3. ON Semiconductor (ON - Free Report)
ON Semiconductor has traditionally been known as a power management and commodity chip maker, but the company has started to carve out a budding IoT division. ON is now heavily involved with automotive solutions, and its IoT offerings also include products catered to wearables, smart city development, and industrial automation.
ON is currently a Zacks Rank #2 (Buy) and has emerged as an interesting earnings growth pick, with EPS totals expected to improve by 26% this year and over 13% on a long-term, annualized basis. Meanwhile, the stock is trading at just 11x forward 12-month earnings and sports a PEG ratio of just 0.8.
Bottom Line
The Internet of Things is one of the most exciting emerging tech markets in the world. And while these specific products are interesting, the real moneymakers in these situations are the companies that are building the tech that powers these products.
The best way for investors to cash in on this growing trend is to identify companies that are not only investing in the Internet of Things, but are also displaying solid fundamentals and impressive Zacks metrics.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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