4 top stocks from the thriving electronics industry
Electronics – Semiconductors
The Zacks Electronics – Semiconductors industry primarily includes companies offering a wide range of semiconductor technologies. The offering includes packaging and test services, wafer cleaning, factory automation, face recognition and image recognition functions for the development of intelligent and connected products. Industry participants primarily serve the consumer electronics, communications, computing, industrial and automotive end markets. In particular, companies are increasing their R&D spending to stay afloat in an era of technological advances and changing industry standards. The underlined industry is seeing solid demand for advanced electronic devices, helping its participants to increase their investments in cost-effective process technologies.
What will shape the future of the electronics and semiconductor industry?
Smart devices to support computing demand: Smart devices require computing and learning capabilities to perform functions such as face recognition, image recognition, and video analytics. These require high levels of processing power, speed, and memory, as well as low power consumption. Additionally, these require better GPUs and solutions, which bodes well for the industry. Graphics solutions help increase the speed of rendering images and improve image resolution and color definition.
Perspectives around Advanced Packaging Robust: Increasing demands for miniaturization, greater functionality, lower power consumption, and improved thermal and electrical performance are driving the demand for semiconductor packaging and test technologies. The growing need for advanced packaging is gaining momentum in the semiconductor industry, which is a major catalyst for industry participants.
Solid acceptance of electronic goods as a tailwind: Electronics that support efficiency and automation are ubiquitous these days. The industry is benefiting from an increased demand for electronic goods and devices fueled by the safety rules and precautions caused by the coronavirus. The ongoing global digital wave has fueled the growth of electronic components and cloud services, benefiting the industry.
Zacks’ industry ranking points to impressive prospects
The Zacks Electronics – Semiconductors industry is housed within the broader Zacks computers and technology Sector. It currently carries a Zacks industry rank of #95, making it in the top 38% of more than 250 Zacks industries.
that of the group Zack’s Industry Rank, which is basically the average of the Zacks rank of all member stocks, indicates a solid near-term outlook. Our research shows that the top 50% of industries evaluated by Zacks outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of industries ranked by Zacks is a result of positive earnings prospects for each company overall. Looking at the revisions to aggregate earnings estimates, analysts appear optimistic about the earnings growth potential of this group. Since December 31, 2021, the industry’s year-to-date earnings estimates are up 8.1%.
Before presenting you with some stocks to consider for your portfolio, let’s take a look at recent stock market performance and the valuation picture of the industry.
Industry lags S&P 500, outperforms sector
Zacks’ electronics and semiconductors sector has underperformed the composite Zacks S&P 500 over the past year but has outperformed Zacks’ broader computing and technology sector.
The industry is up 8.2% over the period, compared to the S&P 500’s 9.3% gain. The broader sector lost 2.7% over the period.
One-year price development
Current rating of the industry
Based on the 12-month price-to-earnings ratio, which is a commonly used multiple to value electronics semiconductor stocks, the industry is currently trading at 16.59X versus the S&P 500 and the sector at 19.73X and 10.73X respectively. 23.56X.
Over the past five years, the industry has traded at 44.87x, 5.62x, and a median of 12.57x, as shown in the charts below.
Price Earnings Ratio (F12M)
4 electronics semiconductor stocks to buy
Broadcom: Based in San Jose, California, the designer, developer and global supplier of a wide range of semiconductor devices benefits from continued strength in both the semiconductor solutions and infrastructure software industries. The robust adoption of next-generation PON with Wi-Fi 6 and 6C access gateways is a major plus. An acceleration in 5G deployment, a production ramp-up and an increase in high-frequency content support the outlook.
This Zacks company, ranked 2nd (Buy), is well positioned to benefit from increased spending by telcos to modernize infrastructure and improve edge and core networks, as well as higher cloud spending from data centers. Solid demand for broadband, networking and wireless products remains another tailwind.
Broadcom has returned 24.2% over the past year. The Zacks Consensus estimate for the company’s fiscal 2022 earnings is up 7.4% over the past 60 days to $35.49 per share.
Price and Consensus: AVGO
GlobalFoundries: Based in Malta, NY, the maker of a range of semiconductor devices including microprocessors, mobile application processors, baseband processors, network processors, radio frequency modems, microcontrollers, power management units and microelectromechanical systems continues to benefit from its position in the global semiconductor supply chain.
This Zacks Rank #2 company is well positioned to capitalize on rising demand for ubiquitous semiconductor solutions. The growing global manufacturing footprint remains another key asset.
GlobalFoundries has returned 21.1% over the past year. The Zacks Consensus estimate for the company’s 2022 earnings is up 6.1% over the past 60 days to $1.90 per share.
Price and Consensus: JRC
Lattice Semiconductor: Based in Hillsboro, OR, the company is benefiting from strong momentum across a variety of OEM server platforms. The advancement of its products, which are heavily used in server and client computing platforms, remains a major asset.
This Zacks #2 company is well positioned to gain a solid foothold among client computing platforms, with features such as security, video bridging, and IO aggregation supported in a variety of form factors.
Lattice Semiconductor has returned 4.5% over the past year. The Zacks Consensus estimate for the company’s 2022 earnings is up 15.7% over the past 60 days to $1.40 per share.
Price and Consensus: LSCC
Synaptic: Based in San Jose, California, the company benefits from its leadership in the development and commercialization of human interface solutions such as touchpads for notebooks, capacitive touchscreen controllers for handsets and biometric fingerprint sensors for mobile devices. The continued strong demand for notebooks due to the home office and online learning trends is an important tailwind.
This Zacks #2 company continues to capitalize on new design dynamics with its organic light-emitting diode touch sensors. The solid prospects in the Internet of Things business also remain remarkable.
Synaptics has returned 21.5% over the past year. The Zacks Consensus estimate for the company’s fiscal 2022 earnings is up 3% over the past 60 days to $12.89 per share.
Price and consensus: SYNA
Boom in infrastructure stocks will sweep America
A massive push to rebuild the crumbling US infrastructure will soon be underway. It is bipartisan, urgent and inevitable. Trillions are spent. Fortunes are made.
The only question is, “Will you get into the right stocks early when their growth potential is greatest?”
Zacks published a special report to help you with that, and today it’s free. Discover 5 specialist companies aiming to get the best out of constructing and repairing roads, bridges and buildings, as well as transporting cargo and converting energy on an almost unimaginable scale.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.