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The Zacks Electronics - Semiconductors industry has been benefiting from the solid adoption of laptops, notebooks, office equipment and network peripherals worldwide. Increasing demand for high-volume consumer electronic devices such as digital media players, smartphones, tablets, and the strong uptake of efficient packaging, machine vision solutions and robotics have been persistently benefiting industry players like Advanced Micro Devices, ASE Technology, Diodes and Cirrus Logic.
Additionally, the growing proliferation of AI, Machine Learning (ML), Blockchain, Internet of Things (IoT), Augmented Reality/Virtual Reality (AR/VR) and industrial revolution 4.0 (which focuses on interconnectivity and automation) 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, and image-recognition capabilities to develop smart and connected products.
The industry participants primarily cater to end-markets constituting consumer electronics, communications, computing, industrial and automotive. Notably, the companies are increasing their spending on research and development in order to stay afloat amid technological advancements and changing industry standards. The underlined industry is experiencing solid demand for advanced electronic equipment, helping its participants increase their investments in cost-effective process technologies.
What's Shaping the Future of the Electronics - Semiconductors Industry?
5G Prospects are Key Catalysts: The growing deployment of 5G holds near-term prospects for the industry players. An uptick in demand for 5G test solutions required for 5G deployment is another major positive. The growing number of high-speed data centers worldwide, which require ultra-fast internet 5G promises to deliver, is another tailwind.
Increased connectivity and technology use in consumer electronics through IoT, AI, robotics, AR/VR, and others further set the demand for 5G. Given the upbeat scenario, the industry is anticipated to remain on the growth trajectory, backed by efforts to strengthen 5G.
Smart Devices Aiding Computing Demand: Smart devices need computing and learning capabilities to perform functions like face detection, image recognition and video analytics capabilities. These require a high level of processing power, speed, memory and low power consumption. These also require better graphic processors and solutions, which bode well for the industry. Graphic solutions help increase the speed of rendering images, and improve image resolution as well as color definition.
Prospects Around Advanced Packaging Solid: The increasing demand for miniaturization, greater functionality, lower power consumption, and improved thermal as well as electrical performance is driving semiconductor packaging as well as test technologies. The growing requirement of advanced packaging is gaining traction in the semiconductor industry, which is a key catalyst for the industry participants.
Zacks Industry Rank Indicates Impressive Prospects
The Zacks Electronics - Semiconductors industry is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #45, which places it in the top 18% 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.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Jun 30, 2021, the industry’s earnings estimates for the current year have moved up 1.4%.
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 as well as the broader Zacks Computer and Technology sector over the past year.
The industry has gained 42.1% over this period compared with the S&P 500’s rise of 23.7%. The broader sector has advanced 25.4% in the said period.
Industry's Current Valuation
Based on the forward 12-month price-to-earnings ratio, a commonly used multiple for valuing electronics semiconductors stocks, the industry is currently trading at 44.42X versus the S&P 500 and the sector’s 21.05X and 28.59X, respectively.
Over the past five years, the industry has traded as high as 44.42X, as low as 5.61X and recorded a median of 12.23X.
4 Electronics Semiconductor Stocks to Keep a Close Eye On
ASE Technology: The Taiwan-based provider of semiconductor manufacturing services in assembly and test is gaining from the robust ATM business, which is riding on the solid momentum across product categories such as wire-bond and advanced packaging, test solutions, consumer, communications and computing. The strengthening utilization of ATM factory lines remains another positive. The increasing use of advanced packaging in applications across computing and communications end markets is another tailwind for ASX.
This Zacks Rank #1 (Strong Buy) company is well-positioned to capitalize on the increased consumer demand for small and delicate electronics solutions on strength in wire-bonded products and advanced packaging. You can see the complete list of today’s Zacks #1 Rank stocks here.
ASE Technology has returned 32.2% in the past year. The Zacks Consensus Estimate for ASX’s fiscal 2021 earnings moved north by 7% to 76 cents per share over the last 60 days.
Diodes: The Plano, TX-based company is benefiting from the rebound in the automotive market. Further, its expanding footprints across Infotainment & Telematics, Body Control Electronics, Power Train, Advanced Driver Assistance Systems, Interior and Exterior Lighting, and Motor Control remains a major positive. Strong demand for DIOD’s Pericom product for high-end PCs, servers and data center applications is another tailwind.
This Zacks Rank #1 company, which offers diodes, rectifiers, transistors, MOSFETs, GPP bridges and GPP Rectifiers, to name a few, remains well-poised to capitalize on high-growth areas like IoT, home automation, smart infrastructure, smartphones, 5G, cloud computing, server, storage, data centers, connected cars, embedded systems and precision controls.
Diodes has returned 50.5% in the past year. The Zacks Consensus Estimate for the company’s 2021 earnings has moved north by 6.3% to $5.06 per share over the past 60 days.
Cirrus Logic: The Austin, TX-headquartered company is gaining from strong customer engagement across its portfolio. Solid demand for CRUS’s audio and haptic solutions remains another tailwind. Moreover, an increase in the penetration of its audio solutions in smartphones is a positive. CRUS is witnessing growing traction across the Android market, which is another positive.
This Zacks Rank #1 company, which develops, manufactures and markets analog, mixed-signal, and audio DSP integrated circuits, remains well-positioned to capitalize on the growth opportunities in voice biometrics and closed-loop controllers.
Cirrus Logic has lost 6.7% in the past year. The Zacks Consensus Estimate for the company’s fiscal 2022 earnings has moved north by 7.6% to $5.37 per share over the past 60 days.
Advanced Micro Devices: The Santa Clara, CA-based company is gaining from the solid momentum across its Ryzen and EPYC server processors. AMD remains well-poised to capitalize on the increasing adoption of AI and ML in industries like cloud gaming and supercomputing on the back of these processors. Strength across Advanced Micro Devices’ Computing and Graphics, and Enterprise Embedded and Semi-Custom segments is a key catalyst.
This Zacks Rank #2 (Buy) company is positioned well to gain significantly from the growing clout of 7-nanometer products in the data center vertical, driven by the work-from-home and online-learning trends.
Advanced Micro Devices has returned 60.2% in the past year. The Zacks Consensus Estimate for the company’s 2021 earnings moved north by 5.6% to $2.64 per share over the last 60 days.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights: Advanced Micro Devices, ASE Technology, Diodes and Cirrus Logic
For Immediate Release
Chicago, IL – December 6, 2021 – Today, Zacks Equity Research discusses Semiconductors, including Advanced Micro Devices, Inc. (AMD - Free Report) , ASE Technology Holding Co., Ltd. (ASX - Free Report) , Diodes Incorporated (DIOD - Free Report) and Cirrus Logic, Inc. (CRUS - Free Report) .
Link: https://www.zacks.com/commentary/1834974/4-top-ranked-stocks-from-a-prospering-electronics-industry
The Zacks Electronics - Semiconductors industry has been benefiting from the solid adoption of laptops, notebooks, office equipment and network peripherals worldwide. Increasing demand for high-volume consumer electronic devices such as digital media players, smartphones, tablets, and the strong uptake of efficient packaging, machine vision solutions and robotics have been persistently benefiting industry players like Advanced Micro Devices, ASE Technology, Diodes and Cirrus Logic.
Additionally, the growing proliferation of AI, Machine Learning (ML), Blockchain, Internet of Things (IoT), Augmented Reality/Virtual Reality (AR/VR) and industrial revolution 4.0 (which focuses on interconnectivity and automation) 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, and image-recognition capabilities to develop smart and connected products.
The industry participants primarily cater to end-markets constituting consumer electronics, communications, computing, industrial and automotive. Notably, the companies are increasing their spending on research and development in order to stay afloat amid technological advancements and changing industry standards. The underlined industry is experiencing solid demand for advanced electronic equipment, helping its participants increase their investments in cost-effective process technologies.
What's Shaping the Future of the Electronics - Semiconductors Industry?
5G Prospects are Key Catalysts: The growing deployment of 5G holds near-term prospects for the industry players. An uptick in demand for 5G test solutions required for 5G deployment is another major positive. The growing number of high-speed data centers worldwide, which require ultra-fast internet 5G promises to deliver, is another tailwind.
Increased connectivity and technology use in consumer electronics through IoT, AI, robotics, AR/VR, and others further set the demand for 5G. Given the upbeat scenario, the industry is anticipated to remain on the growth trajectory, backed by efforts to strengthen 5G.
Smart Devices Aiding Computing Demand: Smart devices need computing and learning capabilities to perform functions like face detection, image recognition and video analytics capabilities. These require a high level of processing power, speed, memory and low power consumption. These also require better graphic processors and solutions, which bode well for the industry. Graphic solutions help increase the speed of rendering images, and improve image resolution as well as color definition.
Prospects Around Advanced Packaging Solid: The increasing demand for miniaturization, greater functionality, lower power consumption, and improved thermal as well as electrical performance is driving semiconductor packaging as well as test technologies. The growing requirement of advanced packaging is gaining traction in the semiconductor industry, which is a key catalyst for the industry participants.
Zacks Industry Rank Indicates Impressive Prospects
The Zacks Electronics - Semiconductors industry is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #45, which places it in the top 18% 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.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Jun 30, 2021, the industry’s earnings estimates for the current year have moved up 1.4%.
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 as well as the broader Zacks Computer and Technology sector over the past year.
The industry has gained 42.1% over this period compared with the S&P 500’s rise of 23.7%. The broader sector has advanced 25.4% in the said period.
Industry's Current Valuation
Based on the forward 12-month price-to-earnings ratio, a commonly used multiple for valuing electronics semiconductors stocks, the industry is currently trading at 44.42X versus the S&P 500 and the sector’s 21.05X and 28.59X, respectively.
Over the past five years, the industry has traded as high as 44.42X, as low as 5.61X and recorded a median of 12.23X.
4 Electronics Semiconductor Stocks to Keep a Close Eye On
ASE Technology: The Taiwan-based provider of semiconductor manufacturing services in assembly and test is gaining from the robust ATM business, which is riding on the solid momentum across product categories such as wire-bond and advanced packaging, test solutions, consumer, communications and computing. The strengthening utilization of ATM factory lines remains another positive. The increasing use of advanced packaging in applications across computing and communications end markets is another tailwind for ASX.
This Zacks Rank #1 (Strong Buy) company is well-positioned to capitalize on the increased consumer demand for small and delicate electronics solutions on strength in wire-bonded products and advanced packaging. You can see the complete list of today’s Zacks #1 Rank stocks here.
ASE Technology has returned 32.2% in the past year. The Zacks Consensus Estimate for ASX’s fiscal 2021 earnings moved north by 7% to 76 cents per share over the last 60 days.
Diodes: The Plano, TX-based company is benefiting from the rebound in the automotive market. Further, its expanding footprints across Infotainment & Telematics, Body Control Electronics, Power Train, Advanced Driver Assistance Systems, Interior and Exterior Lighting, and Motor Control remains a major positive. Strong demand for DIOD’s Pericom product for high-end PCs, servers and data center applications is another tailwind.
This Zacks Rank #1 company, which offers diodes, rectifiers, transistors, MOSFETs, GPP bridges and GPP Rectifiers, to name a few, remains well-poised to capitalize on high-growth areas like IoT, home automation, smart infrastructure, smartphones, 5G, cloud computing, server, storage, data centers, connected cars, embedded systems and precision controls.
Diodes has returned 50.5% in the past year. The Zacks Consensus Estimate for the company’s 2021 earnings has moved north by 6.3% to $5.06 per share over the past 60 days.
Cirrus Logic: The Austin, TX-headquartered company is gaining from strong customer engagement across its portfolio. Solid demand for CRUS’s audio and haptic solutions remains another tailwind. Moreover, an increase in the penetration of its audio solutions in smartphones is a positive. CRUS is witnessing growing traction across the Android market, which is another positive.
This Zacks Rank #1 company, which develops, manufactures and markets analog, mixed-signal, and audio DSP integrated circuits, remains well-positioned to capitalize on the growth opportunities in voice biometrics and closed-loop controllers.
Cirrus Logic has lost 6.7% in the past year. The Zacks Consensus Estimate for the company’s fiscal 2022 earnings has moved north by 7.6% to $5.37 per share over the past 60 days.
Advanced Micro Devices: The Santa Clara, CA-based company is gaining from the solid momentum across its Ryzen and EPYC server processors. AMD remains well-poised to capitalize on the increasing adoption of AI and ML in industries like cloud gaming and supercomputing on the back of these processors. Strength across Advanced Micro Devices’ Computing and Graphics, and Enterprise Embedded and Semi-Custom segments is a key catalyst.
This Zacks Rank #2 (Buy) company is positioned well to gain significantly from the growing clout of 7-nanometer products in the data center vertical, driven by the work-from-home and online-learning trends.
Advanced Micro Devices has returned 60.2% in the past year. The Zacks Consensus Estimate for the company’s 2021 earnings moved north by 5.6% to $2.64 per share over the last 60 days.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.