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5 Stocks to Tap Chipmakers' Rally Headed by Micron

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Micron Technologies, Inc. (MU - Free Report) shares rallied to close at $62.62 on May 29, reaching an 18-year high. The semiconductor giant has been on a steady growth track despite slight weakness witnessed in the semiconductor industry, owing to selloffs in the broader tech market. Micron’s growth definitely proves the increasing demand for micro chips despite rising prices. Moreover, semiconductor stocks have been driving markets for a while now and are poised to perform well in the coming days.

Micron’s Shares Hit 18-Year High

Shares of Micron climbed 2.1% to $62.62, registering its highest close in 18 years on Tuesday. In the past one month, Micron’s shares have increased 33.8%, especially after the semiconductor giant raised its quarterly outlook and announced a $10 billion share buyback.

Micron seems to be on solid ground although chip stocks have taken a hit lately. That said, the overall semiconductor market seems to be bouncing back after President Donald Trump last week tweeted that he is working with China’s president Xi Jinping to get Chinese company ZTE back into business after the Commerce Department last month imposed a ban on American companies from selling components to it for seven years.

Understandably, there are enough reasons for investors to feel confident about Micron given that it has added $20 billion in market value in the past month, primarily because of predictions of a better-than-expected financial performance. Micron’s 36% gain in May is its best monthly performance since 2009.

Micron has grown from strength to strength over the past few years and has emerged as an NAND and DRAM powerhouse. Micron has an expected earnings growth of 132.5% for the current year.

Moreover, eight analysts have upwardly revised their estimates over the last 30 days with no downward revision. The company’s Zacks Consensus Estimate for the current year has improved 4.9% over the last 30 days. Currently, Micron sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Semiconductor Industry on Solid Ground

China is the largest memory chip importer accounting for 20% of 25% NAND chip sales and 20% of DRAM chip sales. However, rising prices of memory chips have been hurting Chinese phone and PC makers. This somewhat hit semiconductor stocks lately.

Also, the Commerce Department last month imposed a ban on American companies from selling components to Chinese company ZTE for seven years, accusing it of misleading U.S. regulators after it settled charges last year of violating sanctions against North Korea and Iran.

This lead ZTE to announce that it was ceasing operations, which had been worrying American chipmakers, as an export ban would mean lower revenues for U.S. chipmakers. However, with Trump tweeting on Sunday that he is working with Xi Jinping to get ZTE back into business, U.S. chipmakers have ample reasons to party.

Given this upbeat scenario you can also consider four other semiconductor stocks to your portfolio. Now, picking winning stocks may be difficult. We have narrowed down our search to the following stocks based on a Zacks Rank #1 and other relevant metrics.

Texas Instruments Inc. (TXN - Free Report) is a global semiconductor design and manufacturing company that develops analog ICs and embedded processors. 

The company has expected earnings growth of 27.8% for the current year. The Zacks Consensus Estimate for the current year has improved 10.3% over the last 60 days.

NVIDIA Corp. (NVDA - Free Report)  is the worldwide leader in graphics processors and media communications devices. The NVIDIA Tesla accelerated computing platform gives modern data centers the power to accelerate both artificial intelligence and high-performance computing workloads.  

The company has expected earnings growth of 61.2% for the current year. The Zacks Consensus Estimate for the current year has improved 12.5% over the last 30 days.

Cypress Semiconductor Corporation (CY - Free Report) is a leader in advanced embedded system solutions for the world's most innovative automotive, industrial, home automation and appliances, consumer electronics and medical products.

The company has expected earnings growth of 40.45% for the current year. The Zacks Consensus Estimate for the current year has improved 2.5% over the last 60 days.

Silicon Laboratories, Inc. (SLAB - Free Report) is a leading provider of silicon, software and solutions for the Internet of Things, Internet infrastructure, industrial automation, consumer and automotive markets. 

The company has expected earnings growth of 10.8% for the current year. The Zacks Consensus Estimate for the current year has improved 4.3% over the last 60 days.

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