The rising penetration of digital technologies and the growing usage of chips across various sectors amid tech advancements are fostering the semiconductor market’s growth. Given the industry’s steady growth prospects, investors could consider quality semiconductor stocks Photronics, Inc. (PLAB), Sumco Corporation (SUOPY), and STMicroelectronics N.V. (STM) for monthly gains.
The global semiconductor market is expected to grow at a 12.3% CAGR until 2032. This expansion can be ascribed to the extensive usage of semiconductors in a wide range of end-use applications. Chips are essential in advancing sectors like electronics, industrial equipment, automotive, networking and communications, and data processing.
The rising adoption of AI-powered devices and applications is one of the key factors positively impacting the Wireless Chipset market growth. The Wireless Chipset market is estimated to grow at a CAGR of 4.4% until 2027.
Furthermore, according to the Semiconductor Industry Association, the worldwide sales of semiconductors totaled $134.70 billion during the third quarter of 2023, up 6.3% quarter-over-quarter. This growth can be attributable to the growing need for semiconductor memory chips with high storage capabilities to resolve the data center complexities in different organizations.
With these favorable trends in mind, let’s delve into the fundamentals of the three best Semiconductor & Wireless Chip stocks, beginning with the third choice.
Stock #3: Photronics, Inc. (PLAB)
PLAB engages in the manufacture and sale of photomask products and services in the United States, Taiwan, China, Korea, Europe, and internationally.
PLAB’s trailing-12-month EBIT margin of 28.44% is 506.3% higher than the industry average of 4.69%. Its trailing-12-month EBITDA margin of 37.43% is 312.9% higher than the industry average of 9.07%.
PLAB’s revenues for the third quarter ended July 30, 2023, rose 2% year-over-year to $224.21 million. Its gross profit rose 3.5% year-over-year to $86.80 million. Its operating income increased 14.1% year-over-year to $1.15 billion. The company’s net income came in at $48.26 million. In addition, its EPS came in at $0.44.
Analysts expect PLAB’s revenue for the fiscal four quarter (ended October 2023) to increase 6.5% year-over-year to $224 million. Its EPS is expected to be $0.53 for the same quarter. In addition, the company exceeded the consensus revenue estimates in three of the trailing four quarters, which is remarkable.
PLAB’s shares have gained 12.4% over the past year to close the last trading session at $21.13.
PLAB’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Momentum and a B in Value and Quality. It is ranked #6 out of 92 stocks in the Semiconductor & Wireless Chip industry.
Beyond what is stated above, we’ve also rated PLAB for Stability, Growth, and Sentiment. Get all PLAB ratings here.
Stock #2: Sumco Corporation (SUOPY)
Headquartered in Tokyo, Japan, SUOPY manufactures and sells silicon wafers for the semiconductor industry worldwide. It provides monocrystalline ingots, as well as polished, annealed, epitaxial, junction isolated, silicon-on-insulator, and reclaimed polished wafers.
SUOPY’s trailing-12-month EBIT margin of 20.90% is 345.6% higher than the 4.69% industry average. Its trailing-12-month ROCE of 14.18% is significantly higher than the 0.99% industry average.
For the half year that ended June 30, 2023, SUOPY’s net sales increased 13.2% year-over-year to ¥220.60 billion ($1.45 billion). The company’s operating income amounted to ¥46.70 billion ($316.37 million). Its net income attributable to owners of the parent increased 18.3% year-over-year to ¥49.60 billion ($336.02 million).
Street expects SUOPY’s revenue to be $698.45 million for the fiscal quarter ending December 2023.
Shares of SUOPY have gained 15.9% over the past month to close the last trading session at $29.85.
It’s no surprise that SUOPY has an overall rating of B, which equates to Buy in our proprietary rating system.
SUOPY has an A grade for Momentum and Stability and a B in Value. It is ranked #18 in the same industry.
In addition to the POWR Ratings highlighted above, one can access SUOPY’s ratings for Quality, Growth, and Sentiment here.
Stock #1: STMicroelectronics N.V. (STM)
Headquartered in Geneva, Switzerland, STM designs, develops, manufactures, and sells semiconductor products in Europe, the Middle East, Africa, the Americas, and the Asia Pacific. The company operates through Automotive and Discrete Group; Analog, MEMS and Sensors Group; and Microcontrollers and Digital ICs Group segments.
On November 29, 2023, STM had introduced the STSAFE-V100-Qi secure element to strengthen privacy and security when charging car occupants’ portable devices. ST also revealed its collaboration with indie Semiconductor, a pure-play automotive semiconductor company, to integrate the new secure element in indie’s Qi wireless in-car charging reference design.
On November 24, STM and ERG, a leading European independent producer of energy from renewable sources, through its subsidiary ERG Power Generation, announced that they had signed a fifteen-year Power Purchase Agreement (PPA) for the supply of renewable energy to its operations in Italy over the 2024-2038 timeframe.
STM’s trailing-12-month EBIT margin of 29.40% is 526.8% higher than the industry average of 4.69%. Its trailing-12-month asset turnover ratio of 0.85x is 38% higher than the industry average of 0.62x.
STM’s net revenues for the third quarter ended September 30, 2023, rose 2.5% year-over-year to $4.43 billion. Its gross profit rose 2.4% year-over-year to $2.11 billion. Its operating income increased 14.1% year-over-year to $1.15 billion. The company’s net income came in at $1.09 billion. In addition, its EPS stood flat at $1.16.
STM’s EPS for the fiscal four quarter (ending December 2023) is expected to be $0.95. Its revenue is expected to be $4.38 billion for the same quarter. In addition, the company exceeded the consensus revenue estimates in each of the trailing four quarters.
Over the past year, the stock has gained 22% to close the last trading session at $47.44.
STM’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has an A grade for Value and a B in Sentiment, Momentum, and Quality. It is ranked #3 in the same industry.
Click here to access the additional STM ratings (Growth and Stability).
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
STM shares were trading at $47.39 per share on Friday morning, down $0.05 (-0.11%). Year-to-date, STM has gained 33.67%, versus a 20.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
The post 3 Semiconductor Stocks Driving the Engine of Monthly Gains appeared first on StockNews.com