Back to top

Image: Bigstock

5 Semiconductor Stocks to Shine in the Aftermath of Coronavirus

Read MoreHide Full Article

The coronavirus (Covid-19) pandemic has induced unprecedented volatility in the financial markets.

Investors, particularly, are having a tough time sailing through the current market turbulence. However, the panic-driven sell-off has created solid buying opportunities.

In this regard, semiconductors, the backbone of the current-day technology-driven economy, are among the few industries expected to rebound faster with handsome returns. 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.

Let’s dig deeper to understand what makes the semiconductor space so fundamentally attractive.

Data-Center, PC Demand Fueling Chip Sales

The lockdown situation has spurred chip demand from PC manufacturers and data-center operators.

Shift in consumer preference for Internet-based services attributed to social distancing will likely increase demand for smartphones, PCs, notebooks and peripheral accessories.

Furthermore, growing demand for hardware that facilitates work-from-home setting is a key catalyst. There has also been an increase in demand for cloud storage. Therefore, data-center operators are enhancing their capacities to accommodate the demand spike for cloud services.

The latest demand trend will, undoubtedly, benefit graphics chip makers. Additionally, the companies, which provide design and other components for chip making, are expected to benefit from this trend.

Semiconductor Stocks Hold Promise

Growing adoption of IoTs, smartphones, storage solutions, networking and connectivity solutions — including Wi-Fi as well as Wi-Fi/Bluetooth integrated SOCs — and the need for high-speed data in both communications networks and data centers bode well for industry participants. Strong demand for analog integrated circles (ICs) should continue to drive the industry’s growth.

The increase in demand for higher speed amid coronavirus-led lockdown will result in accelerated deployment of 5G technology, which promises far more speed than the current 4G LTE, due to low latency.

Further, 5G adoption beyond mobile is likely to boost demand for memory and storage, particularly in IoT devices, wireless infrastructure and data centers.

This apart, blockchain, IoT, autonomous vehicles, AR/VR and wearables are other growth areas.

In such a scenario, investors looking for an entry point in the markets could consider investing in high-quality semiconductor companies that have outperformed the broader S&P 500 in the past year.

Stocks in Focus

Here, we present five semiconductor stocks that are well poised to benefit from this space’s solid growth prospects.

MagnaChip SemiconductorsMX growth prospects look promising. Demand for analog and mixed-signal semiconductor solutions for high-volume consumer applications is expected to increase post the crisis.

MagnaChip designs, manufactures and sells analog and mixed-signal semiconductor platform solutions for communications, IoT, consumer, industrial and automotive applications.

The Zacks Rank #1 (Strong Buy) company has a Growth Score of A. Its fiscal 2020 earnings are expected to be up 85.4% from the figure reported in the previous year. You can see the complete list of today’s Zacks #1 Rank stocks here.

MagnaChip Semiconductor Corporation Price and Consensus

MagnaChip Semiconductor Corporation Price and Consensus

MagnaChip Semiconductor Corporation price-consensus-chart | MagnaChip Semiconductor Corporation Quote

Synaptics SYNA is well poised to capitalize on its market-leading position for both touchpads and secure fingerprint sensors amid upbeat trends in PC shipments. New design wins across all OEM leaders, including Dell, HP and Lenovo, deserve a special mention.

Further, incremental adoption of this Zacks #2 Ranked (Buy) company’s edge SoCs, integrated with AI and embedded neural networks capabilities for smart video and audio devices is anticipated to drive the company in the days ahead.

The company has a Growth Score of A. Synaptics’ fiscal 2020 earnings are expected to be up 44.5% from the figure reported in the previous year.

Synaptics Incorporated Price and Consensus

Synaptics Incorporated Price and Consensus

Synaptics Incorporated price-consensus-chart | Synaptics Incorporated Quote

Advanced Semiconductor Engineering’s ASX innovative advanced packaging and System-in-Package solutions are well-adopted across a broad range of end markets, including 5G, Automotive and High Performance Computing among others.

The Zacks Rank #2 company has a Growth Score of A. Fiscal 2020 earnings are expected to be up 44% from the figure reported in the previous year.

Advanced Semiconductor Engineering, Inc. Price and Consensus

Advanced Semiconductor Engineering, Inc. Price and Consensus

Advanced Semiconductor Engineering, Inc. price-consensus-chart | Advanced Semiconductor Engineering, Inc. Quote

NVIDIA NVDA is anticipated to keep benefiting from solid demand for its GPUs in gaming desktops and notebooks. Also, an increase in Hyperscale demand is a tailwind for this chipmaker’s data-center business. Additionally, ray-traced gaming, rendering, high-performance computing, AI and self-driving cars are key growth areas for this Zacks #3 (Hold) Ranked firm.

In addition, NVIDIA’s Parabricks GPU-accelerated genome analysis toolkit used for medical research is likely to get a boost owing to the coronavirus outbreak.

The company has a Growth Score of A. Additionally, the company’s fiscal 2020 earnings are expected to be up 22.1% from the figure reported in the previous year.

NVIDIA Corporation Price and Consensus

NVIDIA Corporation Price and Consensus

NVIDIA Corporation price-consensus-chart | NVIDIA Corporation Quote

Advanced Micro Devices AMD is benefiting from robust adoption of Ryzen, Radeon and the latest second-gen EPYC processors. Further, accelerated adoption of AMD’s products in the PC, gaming and data center industries is a key catalyst.

This Zacks Rank #3 stock is also poised to gain from strength in GPU ASPs, primarily driven by higher data-center GPU sales. Also, the growing clout of GPUs, aided by increasing adoption of AI techniques and ML tools in industries like gaming, automotive and blockchain, is a positive.

The stock has a Growth Score of A. Additionally, the company’s fiscal 2020 earnings are expected to be up 67.2% from the figure reported in the previous year.

Advanced Micro Devices, Inc. Price and Consensus

Advanced Micro Devices, Inc. Price and Consensus

Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. Quote

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.

This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.

See their latest picks free >>