Skyworks Solutions Inc. (SWKS - Free Report) , an analog and mixed signal semiconductors manufacturer, has had a rough phase so far in 2018. The stock has lost as much as 28.7% year to date, considerably wider than declines of 26.5% and 7.6% for the industry and the S&P 500, respectively. Additionally, Skyworks has a Momentum Score of C, indicating that the stock is not promising at present.
Factors Afflicting the Sector & Skyworks
A saturated consumer electronic market, particularly the smartphone market that is sluggish, is likely to hinder growth prospects of the industry. Moreover, increasing U.S. protectionism is hurting growth prospects of the industry. Lack of skilled workers, particularly from STEM (Science, Technology, Engineering and Mathematics) fields in the United States, have been bothering industry participants for quite some time.
Further, the ongoing trade war between the United States and China has created a volatile environment that is not conducive for investments. Notably, the industry participants generate a significant portion of their revenues from China. As the direct revenue sources are now under the radar of plausible tariffs, concern regarding the prospects of the industry has increased in recent times.
Additionally, volatility in foreign exchange, primarily due to current macro-economic scenario and headwinds in the emerging markets, does not bode well for the industry participants. These factors are likely to be major concerns for Skyworks in 2019.
Consequently, this Zacks Rank #4 (Sell) stock has been witnessing downward revisions lately. The Zacks Consensus Estimate for the company’s earnings in 2019 has declined by 4 cents to $7.28 per share, in the past 30 days.
Further, Skyworks provided dismal guidance for the first quarter of fiscal 2019. The company’s revenues are expected to be $1-$1.020 billion. The Zacks Consensus Estimate is pegged at $1.01 billion, representing a year-over-year decline of 4.1%.
Non-GAAP earnings are anticipated to be $1.91 per share, at mid-point. The Zacks Consensus Estimate is pegged at $1.91 per share, representing a decline of 4.5% year over year.
Obviously, positive momentum has not been on Skyworks’s side. Nevertheless, it is not wise to completely refrain from investing in Semiconductor stocks. Fortunately, there are a few stocks in the semiconductor space that are set to outshine in 2019. Based on the economic backdrop and other factors, we have handpicked four semiconductor stocks that should deliver solid returns in 2019.
Why Invest in Semiconductor Stocks
Robust demand for memory chips and other semiconductor products, owing to the rapid adoption of cloud, Internet of Things (“IoT”), autonomous cars, advanced driver assisted systems (“ADAS”), gaming, wearables, drones, virtual reality/augmented reality (“VR/AR”) devices, artificial intelligence (“AI”), and cryptocurrencies, are fueling massive growth in the space.
The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to spur further growth. Additionally, positive trends in overall IT spending and improving PC shipments are encouraging.
The latest predictions from World Semiconductor Trade Statistics (WSTS) on semiconductor sales also boost investors’ confidence in this industry. The WSTS predicts semiconductor sales to increase 2.6% in 2019.
4 Stocks to Buy for 2019
In view of these positives, we have zeroed in on four semiconductor stocks that are likely to outperform and boost your portfolio returns. Each of these stocks currently carry a Zacks Rank of #1 (Strong Buy) or #2 (Buy).
Manufacturer and supplier of high-quality discrete and analog semiconductor products, Diodes Incorporated (DIOD - Free Report) delivered average positive earnings surprise of 8% in the trailing four quarters. The Zacks Consensus Estimate for earnings and revenues in 2019 is pegged at $2.50 per share and $1.27 billion, representing 6.4% and 4.5% growth year over year, respectively. The stock has rallied 11.7% in the past year. The company currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Fujifilm Holdings Corp. (FUJIY - Free Report) is engaged in the development, production, sales and service of imaging, information and document solutions. The company presently carries a Zacks Rank #1. It delivered average positive earnings surprise of 43.9% in the trailing four quarters. In the past 60 days, the Zacks Consensus Estimate for earnings moved up nearly 2.5% to $2.87 per share for 2019. Notably, the projected year-over-year earnings growth rate for the company is currently pegged at 16.4% for 2020.
Cabot Microelectronics Corporation (CCMP - Free Report) is a supplier of CMP slurries for polishing various materials used in semiconductor manufacturing processes. The company currently has a Zacks Rank #1. It delivered average positive earnings surprise of 13.4% in the trailing four quarters. The Zacks Consensus Estimate for earnings in 2019 has moved up 22.3% to $6.90 per share in the past 60 days. Notably, the projected year-over-year earnings growth rate for the company is currently pegged at 32.2% for 2019.
Impinj, Inc. (PI - Free Report) is a provider of referral and information network radio frequency identification solutions. The company currently carries a Zacks Rank #2 and delivered a positive earnings surprise of 14.6% in the last reported quarter. The Zacks Consensus Estimate for earnings in 2019 represents 41.7% growth year over year. Notably, it has long-term expected EPS growth rate of 20%.
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>