The stock market is in recovery mode since April after bottoming out in late March due to the pessimism surrounding the coronavirus crisis. Optimism over a potential vaccine and an uptick in economic activities, with lockdown measures starting to ease, are mainly driving the U.S. stock market.
In this regard, the electronics industry has emerged as an exception despite facing global trade disruption and supply chain constraints since the beginning of 2020. Burgeoning demand for electronics in healthcare to manage the coronavirus-pandemic remains a major positive. The exponential increase in the number of people contracting the deadly virus has accelerated the demand for electronic monitoring devices. Also, devices like infrared laser thermometer and thermal imaging cameras have been aiding frontline management of coronavirus. Markedly, the electronics space is benefiting from growing proliferation of advanced instruments, electronic testing equipment solutions, thermal management systems, electrical connectors, motors, wearables, electronic design, and metrology solutions across all major sectors worldwide. Additionally, the current work-from-home and learn-from-home trends on account of the pandemic are accelerating the demand for PCs, notebooks and other office equipment, and network peripherals apart from gaming and other leisure devices. Meanwhile, utilization of drones and other robots, contactless delivery tools, has surged globally. This in turn has spurred chip demand from PC manufacturers and data-center operators. Hence, electronic companies offering components to semiconductor manufacturers are well poised to gain from this scenario. Key Factors Driving Growth in Electronics Space Major breakthroughs in cloud computing, predictive analysis, artificial intelligence (AI), virtual assistants, robotics and IoT, have set the stage for solid growth in electronics stocks. Increasing adoption of AI and industrial revolution 4.0 that focuses on interconnectivity, automation, machine learning (ML) and real-time data are shaping the growth trajectory of the electronic industry. Robust demand in the consumer sector for connected appliances is a primary catalyst. Growing proliferation of smart TVs, fitness trackers and home security solutions, high-end smartphones and smart watches, AI-backed smart speakers, dual-screen laptops and high graphics performance gaming PCs is fueling demand for the products offered by electronics solution providers. Moreover, evolution of semiconductor manufacturing processes from 10 nanometer (nm) to 7 nm and even 5 nm technology is expected to boost innovation in electronics. This, in turn, will bolster prospects of the industry. Further, rapid adoption of IoT technology and the emergence of 5G technology present solid prospects for electronics companies. Ongoing modification in Internet infrastructure and evolution of smart cars & autonomous vehicle are also bolstering the demand for electronics testing equipment. Our Picks Considering the alluring long-term growth prospects of electronics stocks, we believe fundamentally strong companies have greater possibilities of bouncing back once the impact of coronavirus subsides. Per the Zacks’ proprietary methodology, stocks with the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer solid investment opportunities. Based on this, here we pick four stocks that boast a perfect mix of elements and strong fundamentals. You can see the complete list of today’s Zacks #1 Rank stocks here. Synaptics ( SYNA Quick Quote SYNA - Free Report) 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 #1 Ranked company’s edge SoCs, integrated with AI and embedded neural network capabilities for smart video and audio devices, is anticipated to be conducive to its financial performance.
The $2.02 billion company has a Growth Score of A. The Zacks Consensus Estimate of $5.81 per share for 2020 earnings has been revised 1.2% upward over the past 60 days.
Synaptics Incorporated Price and Consensus KLA-Tencor Corporation ( KLAC Quick Quote KLAC - Free Report) is benefiting from strong demand for process diagnostics and control equipment and yield management solutions required for the fabrication of semiconductor integrated circuits or chips. This Zacks Rank #2 company enjoys a strong competitive position in several chip equipment areas, including PCB (printed circuit board) and display. At the same time, KLA-Tencor has prominent exposure to 5G smartphones, 5G infrastructure equipment and autonomous driving sensors trending in the technology industry.
KLA-Tencor has a Growth Score of A. The Zacks Consensus Estimate for this $30.4 billion company’s current-year earnings has moved 1.2% north over the past 60 days to $9.86 per share.
KLA Corporation Price and Consensus