For Immediate Release
Chicago, IL – November 16, 2022 – Today, Zacks Equity Research discusses GlobalFoundries (
GFS Quick Quote GFS - Free Report) , Lattice Semiconductor ( LSCC Quick Quote LSCC - Free Report) , Cirrus Logic ( CRUS Quick Quote CRUS - Free Report) and Impinj ( PI Quick Quote PI - Free Report) .
Supply-chain disruptions and end-market dynamics across the world due to the coronavirus pandemic affected the Zacks
Electronics - Semiconductors industry. Macroeconomic headwinds, geo-political tensions and rising inflationary pressure are weighing heavily on the industry’s prospects.
Nevertheless, industry players like
GlobalFoundries, Lattice Semiconductor, Cirrus Logic and Impinj are steadily benefiting from increasing demand for high-volume consumer electronic devices, such as digital media players, smartphones and tablets, and the strong uptake of efficient packaging, machine vision solutions and robotics. 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 (focusing on interconnectivity and automation) should continue to drive the industry’s growth. Industry Description
The Zacks Electronics – Semiconductors industry primarily comprises companies providing 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. The companies are increasing their spending on research and development 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? The industry players are reeling under the impacts of the coronavirus-induced macroeconomic woes. Supply chains were disrupted by the pandemic-led shelter-in-place measures and lockdowns, which severely affected the industry participants. Although economies are gradually reopening in several parts of the world, production delays and underutilization of manufacturing capacities remain a major concern. The pandemic aggravated the concerns related to the economic downturn, thus persistently hurting the industry players’ spending patterns and new bookings. Supply-Chain Disruptions Remain Worrisome: As a result of escalating tensions between the United States and China, the newly-imposed export curbs on China’s chip companies by the U.S. Department of Commerce turned out to be a major headwind. The new export regulation states that semiconductors developed with U.S. technology for use in artificial intelligence, high-performance computing, data centers and supercomputers can only be sold to China-based companies with an export license. This triggered supply shortages in the semiconductor industry, which remains a negative. New Export Rules a Concern: 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 use of technology in consumer electronics through IoT, AI, robotics, AR/VR, et al further set the momentum for 5G. Given the upbeat scenario, the industry is anticipated to remain on the growth trajectory, backed by efforts to strengthen 5G. 5G Prospects Are Key Catalysts: Rising demand for miniaturization, greater functionality, lower power consumption, and improved thermal and electrical performance are driving semiconductor packaging and test technologies. The growing requirement for advanced packaging is gaining traction in the semiconductor industry, a key catalyst for industry participants. Prospects Around Advanced Packaging Solid: Zacks Industry Rank Indicates Bleak Prospects
The Zacks Electronics - Semiconductors industry is housed within the broader Zacks
Computer and Technology sector. It currently carries a Zacks Industry Rank #180, which places it in the bottom 29% of more than 250 Zacks industries.
Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull 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 bottom 50% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since Jul 31, 2022, the industry’s earnings estimates for the current year have moved 6.4% down.
Despite the gloomy industry outlook, a few stocks have the potential to outperform the market based on a strong earnings outlook. But before we present the top industry choices, it is worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Lags S&P 500, Outperforms Sector
The Zacks Electronics - Semiconductors industry has underperformed the Zacks S&P 500 composite but outperformed the broader Zacks Computer and Technology sector, over the past year.
The industry has dropped 26% over this period compared with the S&P 500’s decline of 16.4% and the broader sector’s fall of 33.5%.
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 15.78X compared with the S&P 500 and the sector’s 16.75X and 21.16X, respectively.
Over the past five years, the industry has traded as high as 44.87X, as low as 5.62X and recorded a median of 14X.
4 Electronics Semiconductor Stocks to Keep a Close Eye on GlobalFoundries: The Malta, NY-based manufacturer of a range of semiconductor devices, including microprocessors, mobile application processors, baseband processors, network processors, radio frequency modems, microcontrollers, power management units and microelectromechanical systems, continues to benefit from its position in the global semiconductor supply chain.
The presently Zacks Rank #2 (Buy) player is positioned well to capitalize on strengthening demand for pervasive semiconductor solutions. Its expanding global manufacturing footprint remains another major positive. You can see
the complete list of today’s Zacks #1 Rank stocks here.
GFS has gained 9.1% in the past year. The Zacks Consensus Estimate for the stock’s 2022 earnings has moved 1.9% north to $2.72 per share over the past 30 days.
Lattice Semiconductor: This Hillsboro, OR-based player is gaining traction from the strong momentum across a number of different OEM server platforms. Advancement in its products, widely utilized on server and client-computing platforms, remains a major positive.
The currently Zacks Rank #2 entity is well-poised to gain solid traction among client computing platforms on the back of support provided for functions like security, video bridging and IO aggregation in different form factors.
LSCC has lost 22.3% in the past year. The Zacks Consensus Estimate for the stock’s 2022 earnings has moved 4.2% north to $1.75 per share over the past 30 days.
Impinj: Seattle, WA-based leading provider of RAIN RFID is gaining from the growing IC bookings. PI’s improved supply is likely to boost its endpoint IC unit-volume growth in the days ahead. This remains a major positive. This apart, growing momentum across its end-to-end platform called Impinj Authenticity solution engine, which offers cryptographically authenticating everyday items, is another positive. Additionally, the rising deployment of RAIN-based loss-prevention offering is contributing well to the financial performance of this presently Zacks #2 Ranked stock.
The stock has gained 43.2% in the past year. The Zacks Consensus Estimate for PI’s 2022 earnings has moved 55.2% north to 90 cents per share over the last 30 days.
Cirrus Logic: Austin, TX-headquartered CRUS is gaining from strong customer engagement across its portfolio. Solid demand for Cirrus Logic’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.
The currently Zacks #3 Ranked 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 5.2% in the past year. The Zacks Consensus Estimate for the stock’s fiscal 2023 earnings has moved 5.9% up to $5.93 per share over the past 30 days.
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