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5 Semiconductor Stocks Poised to Continue Winning Streaks in 2022
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The semiconductor industry has continued to showcase its bullish run so far in 2021, following a stellar performance in 2020 despite the pandemic-induced macroeconomic crisis.
ProShares Ultra Semiconductors ETF and Direxion Daily Semiconductor Bull 3X Shares ETF, which measure the performance of the semiconductor industry of the U.S. equity market, have returned more than 100% year to date (YTD). ProShares Ultra Semiconductors and Direxion Daily Semiconductor Bull gained 119.2% and 142.6%, respectively, outperforming the SPDR S&P 500 ETF's rally of 28.5%.
The monthly data on global semiconductor sales from Semiconductor Industry Association (“SIA”) for October 2021 testifies the above-mentioned fact. Citing data compiled by the World Semiconductor Trade Statistics (“WSTS”) organization, SIA revealed global semiconductor sales increased 24% year over year to $48.8 billion in October 2021.
Continuous increase in semiconductor sales will keep benefiting industry participants like ON Semiconductor (ON - Free Report) , STMicroelectronics (STM - Free Report) , Monolithic Power Systems (MPWR - Free Report) , Microchip Technology (MCHP - Free Report) and Lam Research (LRCX - Free Report) .
What’s Driving Semiconductor Sales?
The COVID-19 pandemic has brought about a rapid shift to digitization, spurring demand for various products and devices dependent on chips for their functioning.
The global health crisis has necessitated the use of PC systems, be it for remote work, web-based learning, video conferencing, video gaming, social media, consumer entertainment and streaming, or online shopping.
Meanwhile, over the years, the automotive sector has also evolved to include more electronic components in vehicles that rely on semiconductors. Markedly, following a dip in sales last year due to the pandemic, auto sales have made a remarkable comeback in 2021. Furthermore, IHS Markit predicts global light vehicle production to increase 10.6% year over year in 2022.
Additionally, robust recovery in smartphone sales is boosting demand for semiconductors. According to the latest forecast by International Data Corporation (“IDC”), worldwide shipment of smartphones will likely be up 5.3% year over year to 1.35 billion units in 2021. This suggests a sharp improvement from the 10.5% decline registered in 2020. Moreover, IDC predicts global smartphone shipment to grow 3% in 2022.
Long-Term Prospects Look Promising
Semiconductors are the backbone of the current-day technology-driven economy. The digitization across industries, adoption of cloud computing, and the integration of artificial intelligence and machine learning are likely to fuel demand for semiconductors.
The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to propel further growth. Apart from this, blockchain, Internet of Things, autonomous vehicles, augmented reality/virtual reality and wearables are other growth prospects.
Per the latest WSTS data, the global semiconductor market is predicted to improve 25.6% in 2021, based on double-digit growth across all major product categories, except Optoelectronics. The organization predicts global semiconductor sales to grow 8.8% in 2022.
What Should Investors Do?
Considering the prospects of the chip makers, it makes sense to invest for long-term gains.
Here we’ve picked five semiconductor stocks that are well-positioned to benefit from the above-mentioned trends. Apart from having solid fundamentals, these stocks also have favorable combinations of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Per the Zacks’ proprietary methodology, stocks with such favorable combinations offer solid investment opportunities.
These stocks have also gained over 20% in the year so far and are poised to carry the momentum further in 2022.
5 Solid Picks
ON Semiconductor: It is riding on the growing demand for power and sensing products in the automotive and industrial end markets. Further, it is continuously gaining traction among electric vehicle manufacturers for silicon carbide and insulated-gate bipolar transistor-based products. Solid demand for high-end graphic cards, which is driving computing growth, remains another tailwind.
On Semiconductor, which is an original equipment manufacturer of a broad range of discrete and embedded semiconductor components, is persistently putting strong efforts toward expanding its presence in the automotive end market on the back of its robust intelligent sensing solutions. This remains a major positive.
The stock sports a Zacks Rank #1 and has a Growth Score of B. The Zacks Consensus Estimate for ON Semiconductor’s 2022 earnings has been revised 12 cents upward to $3.28 per share over the past 60 days, indicating an increase of 17.3%. ON stock has gained 110.6% YTD.
Image Source: Zacks Investment Research
STMicroelectronics: The company designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in various microelectronic applications, including telecommunications systems, computer systems, consumer products, automotive products and industrial automation and control systems.
STMicroelectronics is currently seeing very strong demand across most product lines and end markets, which is leading to solid pricing and allowing it to operate at full capacity. Its exposure to the automotive end market (where demand remains above planned capacity expansion) and industrial markets makes this stock a particularly attractive one at this point.
The stock currently carries a Zacks Rank #2 and has a Growth Score of A. The Zacks Consensus Estimate for 2022 earnings has been revised 20 cents upward to $2.56 per share over the past 60 days, indicating an increase of 27.9% year over year. STM stock has gained 33.6% YTD.
Image Source: Zacks Investment Research
Monolithic Power Systems: The company designs, develops and markets high-performance power solutions. The company focuses on the market for high-performance analog and mixed-signal integrated circuits.
Monolithic Power is benefiting from robust demand in Computing & Storage and Communications domains and recovering automotive end-markets as reflected in the third-quarter results. Pandemic-triggered robust demand for cloud servers, storage and solid uptake of home applications, gaming consoles, as well as Internet of Things devices, remains a key catalyst.
Also, Monolithic Power is well-positioned to gain from rapid deployment of 5G on the back of robust portfolio of legacy routers, wireless applications and 5G networking infrastructure-related products. Increasing adoption of point of sales systems, security applications and smart meters, is a key catalyst.
This Zacks Rank #2 company has a Growth Score of A. The Zacks Consensus Estimates for 2022 has been revised upward by 4 cents to $8.47 per share in the past 60 days, suggesting year-over-year growth of 17.8%. The stock has gained 36.1% YTD.
Image Source: Zacks Investment Research
Microchip Technology: It is benefiting from increase in demand for XpressConnect family of low-latency PCI Express (PCIe) 5.0 and Compute Express Link (CXL) 1.1/2.0 retimers. New ultra-low-latency signal transmission technology is required to advance the performance in artificial intelligence, machine learning, Advanced Driver Assisted Systems and other computational workload applications as the high-performance computing demands of data center workloads increases.
In addition, solid momentum of Microsemi’s solutions in Data Center, and Communications end-markets is favoring this Zacks Rank #2 company’s top-line growth.
The stock has a Growth Score of B. The Zacks Consensus Estimate for fiscal 2022 earnings has moved up by couple of cent in the past 30 days to $4.42 per share, indicating year-over-year growth of 33.9%. YTD, MCHP stock has increased 27.8%.
Image Source: Zacks Investment Research
Lam Research: It supplies wafer fabrication equipment for deposition, etching, cleaning and metrology, as well as related services that are used by semiconductor manufacturers in the front-end of the semiconductor manufacturing process. The company has significant exposure to the memory segment (approximately two-thirds of its business), followed by foundry and then logic.
Lam Research is benefiting from the strong memory-chip demand from personal computer (PC) manufacturers, smartphone makers and data-center operators. The COVID-19 pandemic-induced restrictions and social-distancing measures are spurring demand for PCs and notebooks, as more and more workers and students are now working and learning from their homes.
The work-and-learn-from-home necessity is also stoking demand for cloud storage. Furthermore, the social-distancing trend has boosted the usage of online services globally. Therefore, the data-center operators are enhancing their cloud-storage capacities in a bid to accommodate the skyrocketing demand for cloud services, which is, again, fueling demand for memory chips.
This Zacks Rank #2 company has a Growth Score of B. The Zacks Consensus Estimates for fiscal 2022 has been revised upward by 84 cents to $34.29 per share in the past 90 days, implying year-over-year growth of 25.9%. The stock has gained 53.9% YTD.
Image Source: Zacks Investment Research
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5 Semiconductor Stocks Poised to Continue Winning Streaks in 2022
The semiconductor industry has continued to showcase its bullish run so far in 2021, following a stellar performance in 2020 despite the pandemic-induced macroeconomic crisis.
ProShares Ultra Semiconductors ETF and Direxion Daily Semiconductor Bull 3X Shares ETF, which measure the performance of the semiconductor industry of the U.S. equity market, have returned more than 100% year to date (YTD). ProShares Ultra Semiconductors and Direxion Daily Semiconductor Bull gained 119.2% and 142.6%, respectively, outperforming the SPDR S&P 500 ETF's rally of 28.5%.
The monthly data on global semiconductor sales from Semiconductor Industry Association (“SIA”) for October 2021 testifies the above-mentioned fact. Citing data compiled by the World Semiconductor Trade Statistics (“WSTS”) organization, SIA revealed global semiconductor sales increased 24% year over year to $48.8 billion in October 2021.
Continuous increase in semiconductor sales will keep benefiting industry participants like ON Semiconductor (ON - Free Report) , STMicroelectronics (STM - Free Report) , Monolithic Power Systems (MPWR - Free Report) , Microchip Technology (MCHP - Free Report) and Lam Research (LRCX - Free Report) .
What’s Driving Semiconductor Sales?
The COVID-19 pandemic has brought about a rapid shift to digitization, spurring demand for various products and devices dependent on chips for their functioning.
The global health crisis has necessitated the use of PC systems, be it for remote work, web-based learning, video conferencing, video gaming, social media, consumer entertainment and streaming, or online shopping.
Meanwhile, over the years, the automotive sector has also evolved to include more electronic components in vehicles that rely on semiconductors. Markedly, following a dip in sales last year due to the pandemic, auto sales have made a remarkable comeback in 2021. Furthermore, IHS Markit predicts global light vehicle production to increase 10.6% year over year in 2022.
Additionally, robust recovery in smartphone sales is boosting demand for semiconductors. According to the latest forecast by International Data Corporation (“IDC”), worldwide shipment of smartphones will likely be up 5.3% year over year to 1.35 billion units in 2021. This suggests a sharp improvement from the 10.5% decline registered in 2020. Moreover, IDC predicts global smartphone shipment to grow 3% in 2022.
Long-Term Prospects Look Promising
Semiconductors are the backbone of the current-day technology-driven economy. The digitization across industries, adoption of cloud computing, and the integration of artificial intelligence and machine learning are likely to fuel demand for semiconductors.
The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to propel further growth. Apart from this, blockchain, Internet of Things, autonomous vehicles, augmented reality/virtual reality and wearables are other growth prospects.
Per the latest WSTS data, the global semiconductor market is predicted to improve 25.6% in 2021, based on double-digit growth across all major product categories, except Optoelectronics. The organization predicts global semiconductor sales to grow 8.8% in 2022.
What Should Investors Do?
Considering the prospects of the chip makers, it makes sense to invest for long-term gains.
Here we’ve picked five semiconductor stocks that are well-positioned to benefit from the above-mentioned trends. Apart from having solid fundamentals, these stocks also have favorable combinations of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Per the Zacks’ proprietary methodology, stocks with such favorable combinations offer solid investment opportunities.
These stocks have also gained over 20% in the year so far and are poised to carry the momentum further in 2022.
5 Solid Picks
ON Semiconductor: It is riding on the growing demand for power and sensing products in the automotive and industrial end markets. Further, it is continuously gaining traction among electric vehicle manufacturers for silicon carbide and insulated-gate bipolar transistor-based products. Solid demand for high-end graphic cards, which is driving computing growth, remains another tailwind.
On Semiconductor, which is an original equipment manufacturer of a broad range of discrete and embedded semiconductor components, is persistently putting strong efforts toward expanding its presence in the automotive end market on the back of its robust intelligent sensing solutions. This remains a major positive.
The stock sports a Zacks Rank #1 and has a Growth Score of B. The Zacks Consensus Estimate for ON Semiconductor’s 2022 earnings has been revised 12 cents upward to $3.28 per share over the past 60 days, indicating an increase of 17.3%. ON stock has gained 110.6% YTD.
STMicroelectronics: The company designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in various microelectronic applications, including telecommunications systems, computer systems, consumer products, automotive products and industrial automation and control systems.
STMicroelectronics is currently seeing very strong demand across most product lines and end markets, which is leading to solid pricing and allowing it to operate at full capacity. Its exposure to the automotive end market (where demand remains above planned capacity expansion) and industrial markets makes this stock a particularly attractive one at this point.
The stock currently carries a Zacks Rank #2 and has a Growth Score of A. The Zacks Consensus Estimate for 2022 earnings has been revised 20 cents upward to $2.56 per share over the past 60 days, indicating an increase of 27.9% year over year. STM stock has gained 33.6% YTD.
Monolithic Power Systems: The company designs, develops and markets high-performance power solutions. The company focuses on the market for high-performance analog and mixed-signal integrated circuits.
Monolithic Power is benefiting from robust demand in Computing & Storage and Communications domains and recovering automotive end-markets as reflected in the third-quarter results. Pandemic-triggered robust demand for cloud servers, storage and solid uptake of home applications, gaming consoles, as well as Internet of Things devices, remains a key catalyst.
Also, Monolithic Power is well-positioned to gain from rapid deployment of 5G on the back of robust portfolio of legacy routers, wireless applications and 5G networking infrastructure-related products. Increasing adoption of point of sales systems, security applications and smart meters, is a key catalyst.
This Zacks Rank #2 company has a Growth Score of A. The Zacks Consensus Estimates for 2022 has been revised upward by 4 cents to $8.47 per share in the past 60 days, suggesting year-over-year growth of 17.8%. The stock has gained 36.1% YTD.
Microchip Technology: It is benefiting from increase in demand for XpressConnect family of low-latency PCI Express (PCIe) 5.0 and Compute Express Link (CXL) 1.1/2.0 retimers. New ultra-low-latency signal transmission technology is required to advance the performance in artificial intelligence, machine learning, Advanced Driver Assisted Systems and other computational workload applications as the high-performance computing demands of data center workloads increases.
In addition, solid momentum of Microsemi’s solutions in Data Center, and Communications end-markets is favoring this Zacks Rank #2 company’s top-line growth.
The stock has a Growth Score of B. The Zacks Consensus Estimate for fiscal 2022 earnings has moved up by couple of cent in the past 30 days to $4.42 per share, indicating year-over-year growth of 33.9%. YTD, MCHP stock has increased 27.8%.
Lam Research: It supplies wafer fabrication equipment for deposition, etching, cleaning and metrology, as well as related services that are used by semiconductor manufacturers in the front-end of the semiconductor manufacturing process. The company has significant exposure to the memory segment (approximately two-thirds of its business), followed by foundry and then logic.
Lam Research is benefiting from the strong memory-chip demand from personal computer (PC) manufacturers, smartphone makers and data-center operators. The COVID-19 pandemic-induced restrictions and social-distancing measures are spurring demand for PCs and notebooks, as more and more workers and students are now working and learning from their homes.
The work-and-learn-from-home necessity is also stoking demand for cloud storage. Furthermore, the social-distancing trend has boosted the usage of online services globally. Therefore, the data-center operators are enhancing their cloud-storage capacities in a bid to accommodate the skyrocketing demand for cloud services, which is, again, fueling demand for memory chips.
This Zacks Rank #2 company has a Growth Score of B. The Zacks Consensus Estimates for fiscal 2022 has been revised upward by 84 cents to $34.29 per share in the past 90 days, implying year-over-year growth of 25.9%. The stock has gained 53.9% YTD.