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The Zacks Electronics - Semiconductors industry benefits from the growing proliferation of AI, Machine Learning (ML) and industrial revolution 4.0 (which focuses on interconnectivity and automation). The solid adoption of laptops, notebooks, office equipment and network peripherals worldwide has turned out to be a boon for industry players like Cirrus Logic, Synaptics and Navitas Semiconductor.
The growing demand for high-volume consumer electronic devices, including digital media players, smartphones, tablets, efficient packaging, machine vision solutions and robotics, should continue to drive the industry's growth. Also, easing supply-chain constraints are benefiting industry participants.
However, the challenging global macroeconomic environment, end-market volatility, inflationary pressures, unfavorable forex and growing geo-political tensions are persistent concerns for the underlined industry.
Industry Description
The Zacks Electronics – Semiconductors industry comprises firms 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 intelligent and connected products. The participants primarily cater to end-markets constituting consumer electronics, communications, computing, industrial and automotive.
These companies are raising their spending on research and development to stay afloat in an era of technological advancements and changing industry standards. The underlined industry is experiencing solid demand for advanced electronic equipment, helping these firms 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 will expose industry players to near-term prospects. Another major positive is an uptick in demand for 5G test solutions required for 5G deployment. The growing number of high-speed data centers worldwide, which need ultra-fast internet that 5G promises to deliver, is another tailwind.
Increased connectivity and use of technology in consumer electronics through IoT, AI, robotics, AR/VR and others further set the momentum for 5G. Given the upbeat scenario, the industry is anticipated to remain on a growth trajectory, backed by efforts to strengthen 5G infrastructure.
Smart Devices Aiding Computing Demand: Smart devices need computing and learning capabilities to perform face detection, image recognition and video analytics capabilities. These require high processing power, speed and memory, low power consumption and better graphic processors and solutions, which bode well for the industry. Graphic solutions help increase the image rendering rate and improve image resolution and color definition.
Geo-political Tensions Are Worrisome: The ongoing Russia-Ukraine war and, most importantly, the souring relationship between the United States and China remain headwinds. Increasing dependency on AI-backed electronic devices on semiconductors and current restrictions ordered by the U.S. on trading with China, which remains the main hub for chip production, is a significant negative for the underlined industry.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Electronics - Semiconductors industry is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #108, which places it in the bottom 43% 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 outperform 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 look at the industry's recent stock-market performance and valuation picture.
Industry Outperforms S&P 500 & Sector
The Zacks Electronics - Semiconductors industry has outperformed the Zacks S&P 500 composite and surpassed the broader Zacks Computer and Technology sector in the past year.
The companies in the industry have collectively gained 40.8% compared with the S&P 500 and the broader sector's rally of 14.2% and 36.9%, respectively.
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing electronics semiconductors stocks, the industry is currently trading at 22X versus the S&P 500 and the sector's 18.51X and 23.27X, respectively.
Over the past five years, the industry has traded as high as 44.45X, as low as 5.58X and recorded a median of 16.46X.
3 Electronics Semiconductor Stocks to Buy
Navitas Semiconductor: This Torrance, CA-based player is riding on expanding its footprint in the electric vehicle (EV) market. The strength of its silicon carbide (SiC) power semiconductor offerings remains noteworthy. Further, positive contributions from its acquisition of GeneSic Semiconductor are benefiting its customer opportunity pipeline in the EV market. Also, growing demand for on-board and roadside fast chargers remains a plus.
Moreover, the GeneSic buyout is also boosting the company's prospects in the solar energy space. Also, the rising adoption of gallium nitride (GaN) and SiC in solar inverters and energy storage systems is a positive.
The Zacks Rank #1 (Strong Buy) entity, which is one of the leading manufacturers of next-generation power semiconductors including GaN, power integrated circuits, SiC and associated high-speed silicon system controllers, and digital isolators, is well-poised to capitalize on data center prospects, owing to solid demand for GaN and ICs.
NVTS has gained 58.2% in the past year. The Zacks Consensus Estimate for the stock's 2023 bottom line has narrowed from 24 cents to 23 cents in the past 60 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, increasing the penetration of its audio solutions in smartphones is a positive.
The Zacks #2 ranked company, which develops, manufactures and markets analog, mixed-signal and audio DSP integrated circuits, is well-positioned to capitalize on growth opportunities in voice biometrics and closed-loop controllers. Moreover, its growing efforts toward expanding into other applications such as laptops, gaming, tablets and AR/VR are other positives.
Cirrus Logic has returned 11.6% in the past year. The Zacks Consensus Estimate for the stock's fiscal 2024 earnings moved north by 0.2% to $5.25 per share in the past 60 days.
Synaptics: The San Jose, CA-based developer of a range of premium mixed-signal semiconductor solutions, including connectivity, sensors and AI-enhanced processor solutions, continues to benefit from its solid momentum in the IoT applications market. The company's robust converged video, vision, audio and voice technologies and strengthening AI and wireless connectivity capabilities remain a plus.
Further, the Zacks Rank #2 (Buy) company is positioned well to capitalize on growth prospects in the consumer IoT market on the back of its growing investments in far-field voice technology.
Additionally, its recent deal with Broadcom remains a major positive. The deal has added Broadcom's Wi-Fi 7, Bluetooth 6.0 and Bluetooth Enterprise True Wireless Stereo (TWS) IP to Synaptics' wireless license agreement. This will likely further boost Synaptics' prospects in the IoT connectivity space.
Synaptics has gained 6.4% in the past year. The Zacks Consensus Estimate for the company's fiscal 2024 earnings has moved north by 2.6% to $3.18 per share in the last 60 days.
Why Haven't You Looked at Zacks' Top Stocks?
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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.
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 Cirrus Logic, Synaptics and Navitas Semiconductor
For Immediate Release
Chicago, IL – October 12, 2023 – Today, Zacks Equity Research discusses Cirrus Logic (CRUS - Free Report) , Synaptics (SYNA - Free Report) and Navitas Semiconductor (NVTS - Free Report) .
Industry: Electronics
Link: https://www.zacks.com/commentary/2164377/3-top-stocks-to-buy-from-a-booming-electronics-industry
The Zacks Electronics - Semiconductors industry benefits from the growing proliferation of AI, Machine Learning (ML) and industrial revolution 4.0 (which focuses on interconnectivity and automation). The solid adoption of laptops, notebooks, office equipment and network peripherals worldwide has turned out to be a boon for industry players like Cirrus Logic, Synaptics and Navitas Semiconductor.
The growing demand for high-volume consumer electronic devices, including digital media players, smartphones, tablets, efficient packaging, machine vision solutions and robotics, should continue to drive the industry's growth. Also, easing supply-chain constraints are benefiting industry participants.
However, the challenging global macroeconomic environment, end-market volatility, inflationary pressures, unfavorable forex and growing geo-political tensions are persistent concerns for the underlined industry.
Industry Description
The Zacks Electronics – Semiconductors industry comprises firms 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 intelligent and connected products. The participants primarily cater to end-markets constituting consumer electronics, communications, computing, industrial and automotive.
These companies are raising their spending on research and development to stay afloat in an era of technological advancements and changing industry standards. The underlined industry is experiencing solid demand for advanced electronic equipment, helping these firms 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 will expose industry players to near-term prospects. Another major positive is an uptick in demand for 5G test solutions required for 5G deployment. The growing number of high-speed data centers worldwide, which need ultra-fast internet that 5G promises to deliver, is another tailwind.
Increased connectivity and use of technology in consumer electronics through IoT, AI, robotics, AR/VR and others further set the momentum for 5G. Given the upbeat scenario, the industry is anticipated to remain on a growth trajectory, backed by efforts to strengthen 5G infrastructure.
Smart Devices Aiding Computing Demand: Smart devices need computing and learning capabilities to perform face detection, image recognition and video analytics capabilities. These require high processing power, speed and memory, low power consumption and better graphic processors and solutions, which bode well for the industry. Graphic solutions help increase the image rendering rate and improve image resolution and color definition.
Geo-political Tensions Are Worrisome: The ongoing Russia-Ukraine war and, most importantly, the souring relationship between the United States and China remain headwinds. Increasing dependency on AI-backed electronic devices on semiconductors and current restrictions ordered by the U.S. on trading with China, which remains the main hub for chip production, is a significant negative for the underlined industry.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Electronics - Semiconductors industry is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #108, which places it in the bottom 43% 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 outperform 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 look at the industry's recent stock-market performance and valuation picture.
Industry Outperforms S&P 500 & Sector
The Zacks Electronics - Semiconductors industry has outperformed the Zacks S&P 500 composite and surpassed the broader Zacks Computer and Technology sector in the past year.
The companies in the industry have collectively gained 40.8% compared with the S&P 500 and the broader sector's rally of 14.2% and 36.9%, respectively.
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing electronics semiconductors stocks, the industry is currently trading at 22X versus the S&P 500 and the sector's 18.51X and 23.27X, respectively.
Over the past five years, the industry has traded as high as 44.45X, as low as 5.58X and recorded a median of 16.46X.
3 Electronics Semiconductor Stocks to Buy
Navitas Semiconductor: This Torrance, CA-based player is riding on expanding its footprint in the electric vehicle (EV) market. The strength of its silicon carbide (SiC) power semiconductor offerings remains noteworthy. Further, positive contributions from its acquisition of GeneSic Semiconductor are benefiting its customer opportunity pipeline in the EV market. Also, growing demand for on-board and roadside fast chargers remains a plus.
Moreover, the GeneSic buyout is also boosting the company's prospects in the solar energy space. Also, the rising adoption of gallium nitride (GaN) and SiC in solar inverters and energy storage systems is a positive.
The Zacks Rank #1 (Strong Buy) entity, which is one of the leading manufacturers of next-generation power semiconductors including GaN, power integrated circuits, SiC and associated high-speed silicon system controllers, and digital isolators, is well-poised to capitalize on data center prospects, owing to solid demand for GaN and ICs.
You can see the complete list of today's Zacks #1 Rank stocks here.
NVTS has gained 58.2% in the past year. The Zacks Consensus Estimate for the stock's 2023 bottom line has narrowed from 24 cents to 23 cents in the past 60 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, increasing the penetration of its audio solutions in smartphones is a positive.
The Zacks #2 ranked company, which develops, manufactures and markets analog, mixed-signal and audio DSP integrated circuits, is well-positioned to capitalize on growth opportunities in voice biometrics and closed-loop controllers. Moreover, its growing efforts toward expanding into other applications such as laptops, gaming, tablets and AR/VR are other positives.
Cirrus Logic has returned 11.6% in the past year. The Zacks Consensus Estimate for the stock's fiscal 2024 earnings moved north by 0.2% to $5.25 per share in the past 60 days.
Synaptics: The San Jose, CA-based developer of a range of premium mixed-signal semiconductor solutions, including connectivity, sensors and AI-enhanced processor solutions, continues to benefit from its solid momentum in the IoT applications market. The company's robust converged video, vision, audio and voice technologies and strengthening AI and wireless connectivity capabilities remain a plus.
Further, the Zacks Rank #2 (Buy) company is positioned well to capitalize on growth prospects in the consumer IoT market on the back of its growing investments in far-field voice technology.
Additionally, its recent deal with Broadcom remains a major positive. The deal has added Broadcom's Wi-Fi 7, Bluetooth 6.0 and Bluetooth Enterprise True Wireless Stereo (TWS) IP to Synaptics' wireless license agreement. This will likely further boost Synaptics' prospects in the IoT connectivity space.
Synaptics has gained 6.4% in the past year. The Zacks Consensus Estimate for the company's fiscal 2024 earnings has moved north by 2.6% to $3.18 per share in the last 60 days.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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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.