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Which Semiconductor Stocks Will Be the NVIDIA of 2017?
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After a highly volatile first half, the stock market is poised to end 2016 on a solid note, thanks to a rebounding U.S. economy as evident from recently released improved economic data for GDP, Consumer Confidence Index, unemployment rate and factory activity data.
The technology space continues to be investors’ favorite due to its dynamic nature. It is expected to grow faster than ever before. Therefore, if you invest right, you can reap the benefits over time.
Among the 11-sub industries in the broader technology sector, the semiconductor industry has been one of the outperformers so far this year. After an abysmal 2015 that saw iShares PHLX Semiconductor ETF (SOXX - Free Report) lose over 3.3%, stocks across the semiconductor landscape have rebounded well this year.
Notably, the ETF, which represents semiconductor stocks, has witnessed a year-to-date (YTD) gain of approximately 39%, while the Technology Select Sector SPDR ETF (XLK - Free Report) , which represents the overall technology sector, returned 14.2% YTD.
NVIDIA Corporation (NVDA - Free Report) remains one of the best performers in the semiconductor space. The stock has been clocking solid returns since the beginning of 2016 and has gained over 225% YTD, well outperforming the Zacks Semiconductor-General industry’s return of just about 31.6%.
The robust performance is mainly because of the company’s phenomenal results in back-to-back quarters. This has boosted investor confidence in the stock as many realized that the company is much larger than simply GPUs.
Notably, this Zacks Rank #1 (Strong Buy) company has surpassed the Zacks Consensus Estimate in the trailing six quarters with an average positive surprise of 49.3%. Over the past several quarters NVIDIA has been witnessing significant top and bottom line growth on a year-over-year basis mainly driven by robust performance in three of its four major segments – gaming, datacenter and automotive.
However, NVIDIA’s remarkable run may not continue next year as the company is currently trading at a higher price/earnings (P/E) multiple than the industry average. So, we believe that NVIDIA with its hefty forward P/E valuation of 44.0x compared with the industry average of 18.0x may be a risky bet. Moreover, the stock currently carries a VGM Style Score of “D,” which makes us slightly skeptical about the stock’s future.
As we approach 2017, we should look for stocks that have the potential to record significant growth like NVIDIA did in 2016.
Other Picks in the Industry
As the U.S. economy is rebounding, we believe that there are tremendous growth opportunities for semiconductor stocks in 2017.
Notably, as per latest predictions from World Semiconductor Trade Statistics (WSTS), semiconductor sales are likely to increase 3% in 2017 and 2% in 2018.
Right now, the semiconductor segment has several promising stocks to choose from. Here we have picked four semiconductor stocks that have performed well so far this year and have the potential to keep the momentum going in the next year. They also have a favorable Zacks Rank #1 or #2 (Buy), VGM Style Score of “A” or “B,” and low P/E multiple than the industry average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron Technology, Inc. (MU - Free Report) has established itself as one of the leading worldwide providers of semiconductor memory solutions. The stock carries a Zacks Rank #1 and has a VGM Style Score of “A.” Moreover, Micron Technology currently trades at a forward P/E multiple of 14.6x, which is lower than the industry average of 18.0x. Year-to-date, the company has gained 63.8%.
Applied Materials Inc. (AMAT - Free Report) develops, manufactures, markets and services semiconductor wafer fabrication equipment and related spare parts for the worldwide semiconductor industry. The stock carries a Zacks Rank #1 and has a VGM Style Score of “A.” Moreover, Applied Materials has a long-term EPS growth estimate of 13.7% and currently trades at a forward P/E multiple of 13.7x which is lower than the industry average of 17.1x. Year-to-date, the company has gained 76.8%. (Looking for the Best Stocks for 2017? Be among the first to see our Top Ten Stocks for 2017 portfolio here.)
Microsemi Corporation is a leading designer, manufacturer and marketer of analog, mixed-signal and discrete semiconductors. The stock carries a Zacks Rank #2 and has a VGM Style Score of “B.” Moreover, Microsemi has a long-term EPS growth estimate of 12.5% and currently trades at a forward P/E multiple of 17.6x, which is lower than the industry average of 18.0x. Year-to-date, the company has gained 71.1%.
KLA-Tencor Corporation (KLAC - Free Report) is one of the world's leading suppliers of process control and yield management solutions for the semiconductor and related microelectronics industries. The stock carries a Zacks Rank #2 and has a VGM Style Score “B.” Moreover, KLA-Tencor currently trades at a forward P/E multiple of 15.1x, which is lower than the industry average of 17.1x. Year-to-date, the company has gained 14.2%.
Semiconductor companies will continue to transform our world with each passing year. So, if you don’t want to be left behind, make sure you’re investing in quality semiconductor stocks.
Now See Our Private Investment Ideas
While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>
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Which Semiconductor Stocks Will Be the NVIDIA of 2017?
After a highly volatile first half, the stock market is poised to end 2016 on a solid note, thanks to a rebounding U.S. economy as evident from recently released improved economic data for GDP, Consumer Confidence Index, unemployment rate and factory activity data.
The technology space continues to be investors’ favorite due to its dynamic nature. It is expected to grow faster than ever before. Therefore, if you invest right, you can reap the benefits over time.
Among the 11-sub industries in the broader technology sector, the semiconductor industry has been one of the outperformers so far this year. After an abysmal 2015 that saw iShares PHLX Semiconductor ETF (SOXX - Free Report) lose over 3.3%, stocks across the semiconductor landscape have rebounded well this year.
Notably, the ETF, which represents semiconductor stocks, has witnessed a year-to-date (YTD) gain of approximately 39%, while the Technology Select Sector SPDR ETF (XLK - Free Report) , which represents the overall technology sector, returned 14.2% YTD.
NVIDIA Corporation (NVDA - Free Report) remains one of the best performers in the semiconductor space. The stock has been clocking solid returns since the beginning of 2016 and has gained over 225% YTD, well outperforming the Zacks Semiconductor-General industry’s return of just about 31.6%.
The robust performance is mainly because of the company’s phenomenal results in back-to-back quarters. This has boosted investor confidence in the stock as many realized that the company is much larger than simply GPUs.
Notably, this Zacks Rank #1 (Strong Buy) company has surpassed the Zacks Consensus Estimate in the trailing six quarters with an average positive surprise of 49.3%. Over the past several quarters NVIDIA has been witnessing significant top and bottom line growth on a year-over-year basis mainly driven by robust performance in three of its four major segments – gaming, datacenter and automotive.
However, NVIDIA’s remarkable run may not continue next year as the company is currently trading at a higher price/earnings (P/E) multiple than the industry average. So, we believe that NVIDIA with its hefty forward P/E valuation of 44.0x compared with the industry average of 18.0x may be a risky bet. Moreover, the stock currently carries a VGM Style Score of “D,” which makes us slightly skeptical about the stock’s future.
As we approach 2017, we should look for stocks that have the potential to record significant growth like NVIDIA did in 2016.
Other Picks in the Industry
As the U.S. economy is rebounding, we believe that there are tremendous growth opportunities for semiconductor stocks in 2017.
Notably, as per latest predictions from World Semiconductor Trade Statistics (WSTS), semiconductor sales are likely to increase 3% in 2017 and 2% in 2018.
Right now, the semiconductor segment has several promising stocks to choose from. Here we have picked four semiconductor stocks that have performed well so far this year and have the potential to keep the momentum going in the next year. They also have a favorable Zacks Rank #1 or #2 (Buy), VGM Style Score of “A” or “B,” and low P/E multiple than the industry average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron Technology, Inc. (MU - Free Report) has established itself as one of the leading worldwide providers of semiconductor memory solutions. The stock carries a Zacks Rank #1 and has a VGM Style Score of “A.” Moreover, Micron Technology currently trades at a forward P/E multiple of 14.6x, which is lower than the industry average of 18.0x. Year-to-date, the company has gained 63.8%.
Applied Materials Inc. (AMAT - Free Report) develops, manufactures, markets and services semiconductor wafer fabrication equipment and related spare parts for the worldwide semiconductor industry. The stock carries a Zacks Rank #1 and has a VGM Style Score of “A.” Moreover, Applied Materials has a long-term EPS growth estimate of 13.7% and currently trades at a forward P/E multiple of 13.7x which is lower than the industry average of 17.1x. Year-to-date, the company has gained 76.8%. (Looking for the Best Stocks for 2017? Be among the first to see our Top Ten Stocks for 2017 portfolio here.)
Microsemi Corporation is a leading designer, manufacturer and marketer of analog, mixed-signal and discrete semiconductors. The stock carries a Zacks Rank #2 and has a VGM Style Score of “B.” Moreover, Microsemi has a long-term EPS growth estimate of 12.5% and currently trades at a forward P/E multiple of 17.6x, which is lower than the industry average of 18.0x. Year-to-date, the company has gained 71.1%.
KLA-Tencor Corporation (KLAC - Free Report) is one of the world's leading suppliers of process control and yield management solutions for the semiconductor and related microelectronics industries. The stock carries a Zacks Rank #2 and has a VGM Style Score “B.” Moreover, KLA-Tencor currently trades at a forward P/E multiple of 15.1x, which is lower than the industry average of 17.1x. Year-to-date, the company has gained 14.2%.
Semiconductor companies will continue to transform our world with each passing year. So, if you don’t want to be left behind, make sure you’re investing in quality semiconductor stocks.
Now See Our Private Investment Ideas
While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>