4 Top-Rated Semiconductor Stocks to Buy in September
Because government and private initiatives are expected to help many semiconductor companies ramp up production to meet surging demand, it could be wi...
Because government and private initiatives are expected to help many semiconductor companies ramp up production to meet surging demand, it could be wise to scoop up the shares of quality semiconductor stocks STMicroelectronics (STM), Renesas Electronics (RNECF), Silicon Motion (SIMO), and in TEST (INTT). We think these companies are well-positioned to capitalize on the increasing demand for chips. So, let’s examine these names.
The current semiconductor shortage has forced many automakers and consumer electronics manufacturers to cut back production over the past few months. Limited supply and increasing demand for semiconductor chips are driving chip prices higher.
According to the Semiconductor Industry Association, chip sales came in at $133.6 billion in the second quarter, representing a 29.2% year-over-year rise. Furthermore, semiconductor companies worldwide have been increasing production to meet the soaring demand. Government initiatives in several countries to address the semiconductor chip shortage should also boost the industry’s growth. According to an Electronics Sourcing report, the worldwide semiconductor market is expected to grow 19.7% to $527 billion this year.
Hence, we think it could be wise to bet on fundamentally sound semiconductor stocks STMicroelectronics N.V. (STM), Renesas Electronics Corporation (RNECF), Silicon Motion Technology Corporation (SIMO), and inTEST Corporation (INTT). These stocks reported impressive second-quarter results and are rated A (Strong Buy) in our proprietary POWR Ratings system.
STMicroelectronics N.V. (STM)
Headquartered in Geneva, Switzerland, STM’s products include automotive integrated circuits (ICs), discrete and power transistor products, and low-power analog ICs. The company’s segments include its Automotive and Discrete Group; Analog, MEMS and Sensors Group; and Microcontrollers and Digital ICs Group.
On August 25, 2021, STM agreed with Xilinx, Inc. (XLNX) to construct a power solution for the Xilinx Kintex UltraScale XQRKU060 radiation-tolerant FPGA, leveraging STM’s QML-V qualified voltage regulators. This represents the increasing demand for the company’s solutions.
STM’s total revenue increased 43.4% year-over-year to $2.99 billion in the second quarter, which ended July 3, 2021. The company’s operating income came in at $489 million, representing a 361.3% year-over-year rise. While its net income increased 357.8% year-over-year to $412 million, its EPS was $0.44, up 340% year-over-year.
Analysts expect STM’s revenue and EPS to increase 8.1% and 15.5%, respectively, year-over-year to $13.55 billion and $2.23 in its fiscal year 2022. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 19% in price to close yesterday’s trading session at $44.43.
STM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
STM has a B grade for Growth, Value, Sentiment, Quality, and Momentum. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #2 of 99 stocks. Click here to see STM’s rating for Stability as well.
Renesas Electronics Corporation (RNECF)
RNECF is a semiconductor company based in Tokyo, Japan. It operates through two business segments: Automotive and Industrial/Infrastructure/IoT. Also, it serves various industries, including automotive, communication, industrial, personal electronics, and technology.
The company acquired Dialog Semiconductor Plc on August 30. Dialog is a leading battery and power management provider that offers Wi-Fi, Bluetooth low energy, and Industrial edge computing solutions. The acquisition is expected to help RNECF expand its product portfolio in the analog and mixed-signal products space.
For its fiscal second quarter, ended June 30, 2021, RNECF’s revenue increased 30.7% year-over-year to 217.88 billion yen ($1.98 billion). The company’s operating profit increased 105.6% from last year to 35.47 billion yen ($322.72 million). Its net profit came in at 24.07 billion yen ($219 million), representing a 102.3% year-over-year rise. Also, its EPS came in at 13.28 yen ($0.12), up 94.2% year-over-year.
RNECF’s revenue is expected to come in at $2.23 billion for the quarter ending September 30, 2021, representing a 30.6% year-over-year rise. Over the past nine months, the stock has gained nearly 21% in price to close yesterday’s trading session at $10.75.
It’s no surprise that RNECF has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has a B grade for Momentum, Value, Stability, and Quality.
Silicon Motion Technology Corporation (SIMO)
Based in Kowloon, Hong Kong, SIMO develops and markets NAND flash controllers for solid-state storage devices (SSDs) across Taiwan, the United States, South Korea, China, and internationally. Its products are used in smartphones, tablets, personal computers (PCs), and other devices.
On August 31, 2021, SIMO launched its SM2320 single-chip, which is deemed to be the fastest single-chip controller for external portable SSDs worldwide. As a result, the product could give SIMO an edge over its peers.
The company’s non-GAAP revenue increased 61.6% year-over-year to $221.10 million for the second quarter, ended June 30, 2021. SIMO’s non-GAAP operating profit came in at $64.48 million, up 112.2% year-over-year. While its non-GAAP net income increased 84.4% year-over-year to $52.73 million, its non-GAAP EPS was $1.50, up 85.2% year-over-year.
SIMO’s revenue is expected to be $1 billion in its fiscal year 2022, representing a 12.5% year-over-year rise. The company’s EPS is expected to increase 18.6% year-over-year to $7.01 in the next year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 88.2% to close yesterday’s trading session at $74.66.
SIMO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system.
In addition, it has a B grade for Growth, Momentum, Value, Quality, and Sentiment. SIMO is ranked #4 in the Semiconductor & Wireless Chip industry. Click here to see the additional POWR Rating for SIMO (Stability).
Note that SIMO is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.
inTEST Corporation (INTT)
INTT, in Mount Laurel, N.J. supplies test and process solutions for manufacturing and testing in semiconductor, automotive, energy, industrial, medical, and telecommunications markets worldwide. It operates in two segments: Thermal Products (Thermal), and Electromechanical Semiconductor Products (EMS).
On August 4, 2021, INTT’s subsidiary, inTEST Thermal Solutions, collaborated with C1D1 Labs to provide the Thermonics process chiller systems in the emerging cannabis industry. This could lead to increased revenue for the company in the near term.
INTT’s total revenue increased 64.4% year-over-year to $21.82 million for its fiscal second quarter, ended June 30, 2021. Its adjusted EBITDA came in at $3.53 million, representing a 425.3% year-over-year rise. Its non-GAAP net earnings were $2.91 million, up 513.9% year-over-year. Also, its non-GAAP EPS increased 440% year-over-year to $0.27.
For its fiscal year 2021, analysts expect INTT’s revenue and EPS to increase 53.9% and 2,966.7%, respectively, year-over-year to $82.84 million and $0.92. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 133.3% in price to close yesterday’s trading session at $12.60.
INTT’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has a B grade for Growth, Quality, Value, Momentum, and Sentiment.
STM shares were trading at $44.75 per share on Wednesday morning, up $0.32 (+0.72%). Year-to-date, STM has gained 20.84%, versus a 21.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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