We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Electronics Stocks to Buy From a Prospering Industry
Read MoreHide Full Article
The Zacks Electronics – Miscellaneous Products industry is benefiting from the rise in semiconductor capital expenditure despite the negative impacts of the pandemic-induced supply-chain constraints in end-markets like automotive, healthcare and industrial. High demand for semiconductor chips is expected to keep the supply chain under pressure, driving the average selling price. Increasing spending on advanced technologies bodes well for industry participants like Flex (FLEX - Free Report) , Sigma Lithium (SGML - Free Report) and Bel Fuse (BELFB - Free Report) . Continuing investments in data-center, high-performance computing and 5G end markets are the key catalysts. Fab (foundry) expansion in the United States, South Korea, Taiwan and China, as well as higher spending on memory equipment, is expected to drive growth in 2022 and beyond.
Industry Description
The Zacks Electronics – Miscellaneous Products industry includes a number of original equipment manufacturers (OEMs) of air-conditioning systems, remote control systems, GPS navigation, home automation systems, healthcare devices, industry/factory automation, robotics, semiconductor applications and energy management solutions. The industry is evolving on digital transformation and the growing demand for silicon across multiple markets. The increasing cost of manufacturing bodes well for equipment suppliers, while the growing demand for silicon is a positive for semiconductor companies. Apart from the United States, companies in this industry are based in Japan, Germany, the Netherlands and Switzerland. These companies either have manufacturing operations in China and South-East Asia or generate significant revenues from the regions.
3 Trends Shaping the Future of the Industry
Solid Capital Spending Drives Prospects: Technology transitions are driving product complexities, which are raising the demand for solutions provided by the industry participants. Increasing capital expenditure by semiconductor companies is expected to improve further in 2022 and beyond, driven by investments in infrastructure, as well as expanded capacity. Since semiconductor companies are the major customers of miscellaneous electronics product manufacturers, the trend bodes well for industry participants. In addition, rising spending on advanced nodes — 7 nm, 5 nm and 3 nm processes from logic and foundry customers — favors the industry participants. Notably, logic and foundry spending is anticipated to remain healthy this year.
Supply-Chain Constraints Remain Headwinds: Industry participants are bearing the brunt of the coronavirus-induced challenging macroeconomic environment and supply-chain headwinds. These factors have disrupted end-market demand, creating headwinds for industry participants in the near term.
Volatility in Commodity Prices is Concerning: OEMs are exposed to volatility in the prices of commodities like copper and steel. The coronavirus pandemic has negatively impacted commodity markets. Raging inflation doesn’t bode well for the industry participants.
Zacks Industry Rank
The Zacks Electronics – Miscellaneous Products industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #92, which places it in the top 37% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates continued outperformance in the days to come.
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 Lags S&P 500 & Sector
The Zacks Electronics – Miscellaneous Products industry has underperformed the S&P 500 Index and the Computer & Technology sector in the past year.
The industry has fallen 37.9% during this period against the S&P 500 composite’s drop of 19.9% and the broader sector’s decline of 34.7%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month P/E, which is a commonly used multiple for valuing electronics-miscellaneous products companies, we see that the industry is currently trading at 15.08X compared with the S&P 500’s 17.28X and the sector’s forward-12-month P/E of 20.30X.
Over the last five years, the industry traded as high as 19.81X, as low as 10.18X and at the median of 15.01X, as the charts below show.
Forward 12-Month Price-to-Earnings (P/E) Ratio
Stocks to Buy Right Now
Bel Fuse: The Jersey Street, NJ-based company designs, manufactures and markets a broad array of products that power, protect and connect electronic circuits. These products are primarily used in the networking, telecommunications, computing, high-speed data transmission, military, commercial aerospace, transportation and e-Mobility industries.
Bel Fuse’s portfolio of products is also used in the automotive, medical, broadcasting and consumer electronics end markets.
BELFB shares have moved up 154.1% on a year-to-date basis. The Zacks Consensus Estimate for this Zacks Rank #1 (Strong Buy) company’s 2022 earnings has been unchanged at $4.13 per share over the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: BELFB
Flex: The Singapore-based company is benefiting from strength across the Agility Solutions and Reliability Solutions segments, backed by a strong customer backlog. Automotive is expected to gain traction from the increasing demand for electric vehicles. The industrial business is likely to gain momentum from the ongoing secular trends.
Flex raised its revenue outlook for fiscal 2023. This Zacks Rank #2 (Buy) company expects revenues between $29.1 billion and $30.1 billion compared with the earlier mentioned $28.4-$29.4 billion.
The consensus mark for 2022 earnings has been unchanged at $2.28 per share over the past 30 days. Flex shares have moved up 17.8% year to date.
Price and Consensus: FLEX
Sigma Lithium: This Zacks Rank #2 company focuses on the construction of the largest hard rock lithium operation in the Americas, the Grota do Cirilo project, located in the northeastern part of the state of Minas Gerais, Brazil.
SGML shares have moved up 202.6% year to date. The Zacks Consensus Estimate for Sigma Lithium’s 2022 loss has been unchanged at 22 cents per share over the past 30 days.
Price and Consensus: SGML
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
3 Electronics Stocks to Buy From a Prospering Industry
The Zacks Electronics – Miscellaneous Products industry is benefiting from the rise in semiconductor capital expenditure despite the negative impacts of the pandemic-induced supply-chain constraints in end-markets like automotive, healthcare and industrial. High demand for semiconductor chips is expected to keep the supply chain under pressure, driving the average selling price. Increasing spending on advanced technologies bodes well for industry participants like Flex (FLEX - Free Report) , Sigma Lithium (SGML - Free Report) and Bel Fuse (BELFB - Free Report) . Continuing investments in data-center, high-performance computing and 5G end markets are the key catalysts. Fab (foundry) expansion in the United States, South Korea, Taiwan and China, as well as higher spending on memory equipment, is expected to drive growth in 2022 and beyond.
Industry Description
The Zacks Electronics – Miscellaneous Products industry includes a number of original equipment manufacturers (OEMs) of air-conditioning systems, remote control systems, GPS navigation, home automation systems, healthcare devices, industry/factory automation, robotics, semiconductor applications and energy management solutions. The industry is evolving on digital transformation and the growing demand for silicon across multiple markets. The increasing cost of manufacturing bodes well for equipment suppliers, while the growing demand for silicon is a positive for semiconductor companies. Apart from the United States, companies in this industry are based in Japan, Germany, the Netherlands and Switzerland. These companies either have manufacturing operations in China and South-East Asia or generate significant revenues from the regions.
3 Trends Shaping the Future of the Industry
Solid Capital Spending Drives Prospects: Technology transitions are driving product complexities, which are raising the demand for solutions provided by the industry participants. Increasing capital expenditure by semiconductor companies is expected to improve further in 2022 and beyond, driven by investments in infrastructure, as well as expanded capacity. Since semiconductor companies are the major customers of miscellaneous electronics product manufacturers, the trend bodes well for industry participants. In addition, rising spending on advanced nodes — 7 nm, 5 nm and 3 nm processes from logic and foundry customers — favors the industry participants. Notably, logic and foundry spending is anticipated to remain healthy this year.
Supply-Chain Constraints Remain Headwinds: Industry participants are bearing the brunt of the coronavirus-induced challenging macroeconomic environment and supply-chain headwinds. These factors have disrupted end-market demand, creating headwinds for industry participants in the near term.
Volatility in Commodity Prices is Concerning: OEMs are exposed to volatility in the prices of commodities like copper and steel. The coronavirus pandemic has negatively impacted commodity markets. Raging inflation doesn’t bode well for the industry participants.
Zacks Industry Rank
The Zacks Electronics – Miscellaneous Products industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #92, which places it in the top 37% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates continued outperformance in the days to come.
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 Lags S&P 500 & Sector
The Zacks Electronics – Miscellaneous Products industry has underperformed the S&P 500 Index and the Computer & Technology sector in the past year.
The industry has fallen 37.9% during this period against the S&P 500 composite’s drop of 19.9% and the broader sector’s decline of 34.7%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month P/E, which is a commonly used multiple for valuing electronics-miscellaneous products companies, we see that the industry is currently trading at 15.08X compared with the S&P 500’s 17.28X and the sector’s forward-12-month P/E of 20.30X.
Over the last five years, the industry traded as high as 19.81X, as low as 10.18X and at the median of 15.01X, as the charts below show.
Forward 12-Month Price-to-Earnings (P/E) Ratio
Stocks to Buy Right Now
Bel Fuse: The Jersey Street, NJ-based company designs, manufactures and markets a broad array of products that power, protect and connect electronic circuits. These products are primarily used in the networking, telecommunications, computing, high-speed data transmission, military, commercial aerospace, transportation and e-Mobility industries.
Bel Fuse’s portfolio of products is also used in the automotive, medical, broadcasting and consumer electronics end markets.
BELFB shares have moved up 154.1% on a year-to-date basis. The Zacks Consensus Estimate for this Zacks Rank #1 (Strong Buy) company’s 2022 earnings has been unchanged at $4.13 per share over the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: BELFB
Flex: The Singapore-based company is benefiting from strength across the Agility Solutions and Reliability Solutions segments, backed by a strong customer backlog. Automotive is expected to gain traction from the increasing demand for electric vehicles. The industrial business is likely to gain momentum from the ongoing secular trends.
Flex raised its revenue outlook for fiscal 2023. This Zacks Rank #2 (Buy) company expects revenues between $29.1 billion and $30.1 billion compared with the earlier mentioned $28.4-$29.4 billion.
The consensus mark for 2022 earnings has been unchanged at $2.28 per share over the past 30 days. Flex shares have moved up 17.8% year to date.
Price and Consensus: FLEX
Sigma Lithium: This Zacks Rank #2 company focuses on the construction of the largest hard rock lithium operation in the Americas, the Grota do Cirilo project, located in the northeastern part of the state of Minas Gerais, Brazil.
SGML shares have moved up 202.6% year to date. The Zacks Consensus Estimate for Sigma Lithium’s 2022 loss has been unchanged at 22 cents per share over the past 30 days.
Price and Consensus: SGML
