The semiconductor industry thrived last year on increased demand for electronic devices from companies and individuals seeking to stay connected and entertained during the worst of the COVID-19 lockdown mandates. The demand for semiconductors increased significantly from the booming electric vehicle (EV) industry also. This, along with a global semiconductor shortage, helped semiconductor stocks gain significantly over the past year. This is evidenced by SPDR S&P Semiconductor ETF’s (XSD) 74.5% returns over the past year versus the SPDR S&P 500 ETF’s (SPY) 47.4% gains.
The industry is expected to continue growing due to mainstream adoption of internet of things (IoT), 5G, artificial intelligence (AI) and electric vehicles (EVs). According to ResearchAndMarkets, the semiconductor market is expected to grow at a CAGR of more than 6% between 2021 – 2026.
While the current tech sell-off has caused the stocks of established semiconductor companies NXP Semiconductors N.V. (NXPI), KLA Corporation (KLAC), and Skyworks Solutions, Inc. (SWKS) to lose some value, they are expected to rebound quickly based on the industry’s solid growth prospects. So, now could be a perfect opportunity to scoop up these stocks.
NXP Semiconductors N.V. (NXPI)
Headquartered in Eindhoven, Netherlands, NXPI offers various semiconductor products internationally. The company’s product portfolio includes microcontrollers, communication processors, analog and interface devices, radio frequency power amplifiers, and security controllers. Its product solutions are used in a range of applications, including automotive, industrial and Internet of Things (IoT), mobile, and communication infrastructure.
In March, NXPI announced the expansion of its EdgeVerse portfolio with its crossover applications processors that include i.MX 8ULP and i.MX 8ULP-CS, and next-generation i.MX 9 series of high-performance intelligent applications processors. In February, the company also introduced its new EdgeLock 2GO IoT service platform for easy, secure deployment and management of IoT devices and services. These product introductions are expected to increase its sales based on higher demand for its efficient solutions.
For its fiscal 2021 first quarter, ended April 4, the company’s revenue was $2.60 billion, which represents a 27% year-over-year increase. Its operating income increased 623.5% year-over-year to $492 million. Its net income came in at $364 million, compared to a $13 million loss in the prior-year period. Also, the company’s EPS was $1.25 compared to a $0.08 loss in the prior-year period.
Analysts expect NXPI’s EPS to increase 145.7% year-over-year to $2.31 for the current quarter, ending June 30, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 22.7% year-over-year to $10.57 billion in its fiscal year 2021. The stock has gained 91.8% over the past year and closed yesterday’s trading session at $192.52. It is currently trading 11% below its $216.43 52-week high.
NXPI’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth, and a B grade for Sentiment. Within the B-rated Semiconductor & Wireless Chip industry, NXPI is ranked #24 of 98 stocks.
To see the additional POWR Ratings for NXPI (Momentum, Stability, Value and Quality), click here.
KLA Corporation (KLAC)
KLAC designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nanoelectronics industries worldwide. It offers chip and wafer , reticle, and packaging manufacturing products among other products. The company offers its products and services to various bare wafer, integrated circuit, reticle, and hard disk drive manufacturers.
On March 15, Orbotech, a KLA company, launched InFlow, a robust, automated, all-in-one engineering software solution for PCB manufacturers. In December KLAC introduced its PWG5 wafer geometry system and its Surfscan SP7XP wafer defect inspection system. . They are designed to address difficult issues in the manufacture of leading-edge memory and logic integrated circuits. Thanks to its innovative products, the company is expected to generate increasing demand for its products and services in the coming months.
For its fiscal year 2021 third quarter, ended March 31, the company’s revenue came in at $1.80 billion, which represents a 26.7% year-over-year increase. Its non-GAAP net income increased 53.7% year-over-year to $598 million. Also, its non-GAAP EPS increased 55.9% year-over-year to $3.85.
Analysts expect KLAC’ EPS to increase 45.8% year-over-year to $3.98 for the current quarter, ending June 30. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 28.6% year-over-year to $1.91 billion for the quarter ending September 30. The stock has gained 92.8% over the past year. It closed yesterday’s trading session at $315.89 and is currently trading 12.2% below its $359.69 all-time high, which it hit on April 5.
It’s no surprise that KLAC has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality, and a B grade for Momentum.
Click here to see KLAC’s ratings for Growth, Value, Sentiment and Stability. KLAC is ranked #28 in the same industry.
Skyworks Solutions, Inc. (SWKS)
SWKS, along with its subsidiaries, designs, develops, manufactures, and markets proprietary semiconductor products that include intellectual property in the United States and many other regions. Its product portfolio includes amplifiers, attenuators, demodulators, and detectors. The company provides to the aerospace, automotive, broadband, industries and other areas.
SWKS announced on April 22 that it had entered an agreement with Silicon Laboratories Inc. (SLAB). It will acquire SLAB’s infrastructure and automotive business in an all-cash asset transaction valued at $2.75 billion. The acquisition is expected to accelerate SWKS’ expansion into the industry’s most important growth segments.
In January, SWKS partnered with ASUS to launch the world’s first ultra-fast Wi-Fi 6e extended band router. This is expected to generate increased sales because Wi-Fi routers are currently in high demand.
For its fiscal year 2021 second quarter, ended April 2, the company’s revenue came in at $1.17 billion, which represents a 53% year-over-year increase. SWKS’ operating income grew 87.8% year-over-year to $374.70 million. Its net income increased 79.4% year-over-year to $325 million. Also, its EPS increased 84% year-over-year to $1.95.
Analysts expect SWKS’ EPS to increase 72% year-over-year to $2.15 for the current quarter, ending June 30, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 49.2% year-over-year to $5.01 billion in its fiscal year 2021. The stock has gained 66.1% over the past year and closed yesterday’s trading session at $175.93. It is currently trading 13.8% below its $204 all-time high.
SWKS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has a B grade for Quality and Value also.
We have also graded SWKS for Growth, Momentum, Sentiment and Stability. Click here to access all of SWKS’ ratings. It is ranked #18 in the same industry.
NXPI shares were trading at $196.45 per share on Friday afternoon, up $3.93 (+2.04%). Year-to-date, NXPI has gained 23.92%, versus a 13.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More…