After a disastrous 2019, the semiconductor industry is now witnessing a recovery. Notably, the broader iShares PHLX Semiconductor ETF (SOXX) is up 7% year to date and has surged 30.6% over the past six months.
More importantly, it has outperformed the SPDR S&P 500 ETF (SPY), which has gained 5.2% year to date and 15.7% in the past six months.
Notably, per data from The Semiconductor Industry Association (SIA), global semiconductor industry sales were $412.1 billion in 2019, down 12.1% from in 2018. However, fourth-quarter sales of $108.3 billion increased 0.9% sequentially, reflecting a likely turnaround.
According to World Semiconductor Trade Statistics (WSTS), annual global semiconductor sales are expected to witness growth of 5.9% in 2020 and 6.3% in 2021.
Growth Prospects Aplenty for Semiconductor Stocks
Semiconductors are the building blocks of most emerging technologies like AI and IoT. In fact, semiconductors are setting the pace for technology modernization, in turn, digitizing healthcare, transport, financial systems, defense, agriculture, and retail, among others.
Moreover, robust adoption of cloud computing, autonomous vehicles, advanced driver assisted systems (ADAS), gaming, wearables, drones and VR/AR devices is fueling massive growth in the semiconductor space.
Additionally, excess NAND and DRAM inventory, which limited growth for the most part of 2019, is expected to normalize, thereby improving average selling price in 2020.
The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to spur further growth.
Although the coronavirus outbreak in China is a headwind, we believe the negative impact on the sector will be limited. Moreover, signing of the phase one deal to de-escalate the trade war between the United States and China bodes well for the industry’s growth.
In view of the aforesaid positive factors, we have zeroed in on five semiconductor stocks that are likely to outperform the market and boost your portfolio returns.
These stocks have a favorable combination of a VGM Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Per the Zacks’ proprietary methodology, stocks with such a favorable combination offer good investment opportunities.
These stocks have also outperformed the S&P 500 in the past year.
Amkor Technology AMKR is benefiting from the rising need for advanced packaging technologies in the consumer and mobile markets. Further, it is witnessing growing demand for advanced chips and modules in the computing market.
The company sports a Zacks Rank #1 and has a VGM Score of A. Moreover, the Zacks Consensus Estimate for 2020 earnings has increased 25% to $1 per share in the past 30 days.
Cirrus Logic CRUS has been benefiting from robust demand for smartphone components, as well as smart codecs and amplifiers in wired and wired and wireless headphones. Rising demand for boosted amplifiers in tablets and laptops is also a tailwind.
The company sports a Zacks Rank of #1 and has a VGM Score of B. Moreover, the Zacks Consensus Estimate for fiscal 2021 earnings has increased 14.4% to $3.89 per share in the past 30 days.
Qorvo QRVO is benefiting from the robust adoption of its wireless connectivity, base station and Gallium Nitride (GaN) technology-based solutions. Moreover, its expanding portfolio of 5G solutions amid accelerated deployment of 5G bodes well for the company.
The company has a Zacks Rank of #1 and a VGM Score of B. Moreover, the consensus mark for fiscal 2021 earnings has increased 3.5% to $7.01 per share in the past 30 days.
Intel INTC is benefiting from its data-centric focus. Strong adoption of its second-gen Xeon scalable processors as well as solid demand from cloud service providers is driving data centric businesses. The company is planning nine product releases on 10 nm this year. Moreover, it is adding 25% wafer capacity across its 14 nm and 10 nm nodes in 2020.
The company has a Zacks Rank #2 and a VGM Score of A. Additionally, the Zacks Consensus Estimate for 2020 earnings has increased 5.7% to $4.99 per share in the past 30 days.
Lam Research LRCX is benefiting from continued strength in logic and foundry spending. Transition to new data-enabled economy, in which DRAM and NAND continue to gain from density growth, is also aiding the company’s prospects. Moreover, robust adoption of 3D architecture is driving its non-memory segments.
The company carries a Zacks Rank of 2 and has a VGM Score of B. Moreover, the Zacks Consensus Estimate for fiscal 2020 earnings has increased 10.7% to $16.82 per share in the past 30 days.
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