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.
Some of the prominent stocks in this industry are Advanced Micro Devices AMD and Broadcom AVGO.
Here are the three major themes in the industry:
- The emerging trend of computing in smart devices is a key catalyst for this industry. These devices need their own computing and learning capabilities to perform smart functions like face detection, image recognition and video analytics capabilities. Therefore, these require high levels of processing power, speed, memory and low power consumption, which are provided by the industry participants.
- Increasing adoption of AI techniques and machine learning tools in industries like gaming, automotive and blockchain are driving demand for better graphics processors and solutions, which bode well for the industry. These graphics solutions help in increasing the speed of rendering images, and improving image resolution and colour definition.
- The increasing demand for miniaturization, greater functionality, lower power consumption, and improved thermal and electrical performance are driving demand for semiconductor packaging and test technologies, thereby helping the participants of this industry.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Electronics - Semiconductors industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #32, which places it at the top 13 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 and 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 20.5% over this period compared with the S&P 500’s rise of 5%. The broader sector has increased 12.5% 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 11.18Xversus the S&P 500 and the sector’s 16.89X and 19.93X, respectively.
Over the past five years, the industry has traded as high as 27.50X, as low as 5.74X and recorded a median of 11.36X, as the charts below show.
Price-to-Earnings (P/E) Ratio (F1)
Price-to-Earnings (P/E) Ratio (F1)
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.
Here, we present three stocks that either have a Zacks Rank #1 (Strong Buy) or 2 (Buy). These stocks are well positioned to outperform the market. You can see the complete list of today’s Zacks #1 Rank stocks here.
ACM Research, Inc. ACMR is a provider of single-wafer wet cleaning equipment used by manufacturers of advanced semiconductors. This Zacks Rank #1 stock has gained 201.2% in the past year. The Zacks Consensus Estimate for earnings for the current year has remained stable at $1.05 over the past 30 days.
Price and Consensus: ACMR
Cirrus Logic, Inc. CRUS is a fabless semiconductor supplier, which develops, manufactures and markets analog, mixed-signal, and audio DSP integrated circuits. This Zacks Rank #1 stock has gained 67.1% in the past year. The Zacks Consensus Estimate for earnings for the current year has increased 14.7% to $3.89 per share over the past 30 days.
Price and Consensus: CRUS
Amkor Technology, Inc. (AMKR) is one of the largest providers of semiconductor packaging and test services. This Zacks Rank #1 stock has gained 17.2% in the past year. The Zacks Consensus Estimate for earnings for the current year has increased 5% to $1 per share over the past 30 days.
Price and Consensus: AMKR
Mellanox Technologies, Ltd. (MLNX) is a fabless semiconductor company that develops high-speed interconnects solutions. This Zacks Rank #1 stock has gained 8.8% in the past year. The Zacks Consensus Estimate for 2020 earnings has increased 8% to $7.60 per share over the past 30 days.
Price and Consensus: MLNX