Electronics - Semiconductors industry is benefiting from growing proliferation of laptops, notebooks, office equipment and network peripherals, which have turned out to be a boon for this industry. Also, solid adoption of AI and industrial revolution 4.0 — which focuses on interconnectivity, automation and machine learning — is a tailwind. Cirrus Logic ( CRUS Quick Quote CRUS - Free Report) , Amkor Technology ( AMKR Quick Quote AMKR - Free Report) , Silicon Motion Technology ( SIMO Quick Quote SIMO - Free Report) , and Alpha and Omega Semiconductor ( AOSL Quick Quote AOSL - Free Report) are well positioned to benefit from the above-mentioned positives. Growing demand for advanced electronic equipment — including high-volume consumer electronic devices such as digital media players, smartphones, tablets, efficient packaging, machine vision solutions, robotics and cost-effective process technologies — should continue to drive the industry’s growth. Industry Description
The Zacks Electronics - Semiconductors industry primarily comprises companies that provide a wide range of semiconductor technologies. Their offerings include packaging and test services, wafer cleaning, factory automation, face detection, as well as image recognition capabilities to develop smart and connected products.
The industry participants primarily cater to end markets that constitute consumer electronics, communications, computing, industrial and automotive. What’s Shaping the Future of the Electronics – Semiconductors Industry? Electronics aid efficiency and automation of almost any work, rendering it virtually ubiquitous in this day and age. The current scenario seems to have favored this industry that has been gaining on increased demand for electronic goods and appliances fueled by coronavirus-induced safety rules and precautions. Moreover, the ongoing global digital wave has been driving growth of electronic components and cloud services, thereby benefiting this industry. Growing Demand for Electronic Goods is a Tailwind: Increasing demand for miniaturization, greater functionality, lower power consumption, and improved thermal as well as electrical performance are driving demand for semiconductor packaging and test technologies. Growing requirement of advanced packaging is gaining strong traction in the semiconductor industry, which is a key catalyst for the industry participants. Advanced Packaging Enhances Prospects: Nowadays, smart devices need their own computing and learning capabilities to perform smart functions like face detection, image recognition, as well as video analytics capabilities. Therefore, these require high level of processing power, speed, memory and low power consumption. In addition, they also require better graphic processors and solutions, which bode well for the industry. These graphic solutions help in increasing the speed of rendering images, and improving image resolution as well as colour definition. Computing Requirement in Smart Devices a Key Catalyst: Zacks Industry Rank Indicates Impressive Prospects
The Zacks Electronics - Semiconductors industry is housed within the broader Zacks
Computer and Technology sector. It carries a Zacks Industry Rank #74, which places it in the top 30% of more than 250 Zacks industries. The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1. Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture. Industry Outperforms S&P 500 & Sector
The Zacks Electronics - Semiconductors industry has surpassed the Zacks S&P 500 composite, and the broader Zacks Computer and Technology sector over the past year.
The industry has gained 47.3% over this period compared with the S&P 500’s rise of 14.5%. The broader sector has increased 38.3% in the said period. One-Year Price Performance Industry’s Current Valuation
On the basis of forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing electronics semiconductors stocks, the industry is currently trading at 16.32X versus the S&P 500 and sector’s 22.28X and 27.39X, respectively.
Over the past five years, the industry has traded as high as 29.47X, as low as 5.61X and recorded a median of 11.23X, as the charts below show. Price-to-Earnings (P/E) Ratio (F1) Price-to-Earnings (P/E) Ratio (F1) 4 Electronics Semiconductors Stocks to Keep a Close Eye on Amkor Technology: The company is benefiting from strong performance of advanced product lines. Further, solid demand in automotive, communications and industrial markets is driving growth. Moreover, it is benefiting from strong momentum across computing and consumer markets.
Further, this Zacks Rank #1 (Strong Buy) company is well positioned to benefit from growing traction across 5G, advanced automotive systems, IoT wearables and high-performance computing on the heels of robust advanced packaging technologies. Notably, Amkor Technology has declined 0.7% in the past year.
The Zacks Consensus Estimate for 2020 earnings has been revised 24% upward to $1.24 per share over the past 30 days. Price and Consensus: AMKR Cirrus Logic: The company is well poised to gain from higher sales of smart codecs and amplifiers in wired and wireless headphones. Apart from the mobile market, rising demand for boosted amplifiers in tablets and laptops remains a key driver. Further, robust demand for certain components in smartphones remains a key cataylst. Shares of Cirrus Logic have gained 4% in the past year. This Zacks Rank #1 company is likely to gain from increasing growth opportunities in voice biometrics and closed-loop controllers. You can see the complete list of today’s Zacks #1 Rank stocks here. Notably, the Zacks Consensus Estimate for fiscal 2021 earnings has been upwardly revised by 34.4% over the past 30 days to $4.38 per share. Price and Consensus: CRUS Silicon Motion Technology: It is a leading developer of microcontroller ICs for NAND flash storage devices. The company is benefiting from growing adoption of embedded memory controllers in smartphones. Also, solid uptake of controllers — courtesy of growing adoption of embedded memory controllers in smartphones — is aiding growth. Further, this Zacks Rank #2 (Buy) company is benefiting from increased PC sales, triggered by online learning and work-from-home wave owing to coronavirus crisis. Notably, Silicon Motion Technology has lost 14.3% over a year. The Zacks Consensus Estimate for 2020 earnings has been revised 1.4% upward to $2.94 per share over the past 30 days. Price and Consensus: SIMO Alpha and Omega Semiconductor: The company is gaining strong momentum in the power semiconductor market. Further, coronavirus-induced growing sales of gaming, TVs and home appliances are aiding its performance in the consumer end market. Additionally, the improving AC-DC power supply business owing to strong demand for adapters used for PCs and gaming systems remains a tailwind. Further, growing shipments of the company’s products required in computing and gaming applications are major positives. Alpha and Omega Semiconductor currently has a Zacks Rank #2. It has gained 49.1% over a year. The Zacks Consensus Estimate for 2020 earnings has remained stable at $1.37 per share over the past 30 days. Price and Consensus: AOSL