Shares of some of the biggest names in the semiconductor industry, including Advanced Micro Devices AMD, Nvidia NVDA, and Micron MU had soared in 2019. The comebacks of many chip giants were largely a function of market-wide selloffs that created buying opportunities to start the year.
With that said, AMD stock has continued to climb even as the historically cyclical semiconductor industry faces a near-term downturn. Even industry heavyweights are beholden to their customers’ product cycles, capital investments, and more. On top of that, chip oversupply can hurt pricing power, as is currently the case for some firms.
Still, despite some of the current headwinds, the industry looks poised to remain highly valuable within the larger technological revolution. Semiconductor companies are poised to help drive forward the growth of the Internet of Things, artificial intelligence, autonomous vehicles, and much more. And it won’t just be the likes of Tesla TSLA, Apple AAPL, Microsoft MSFT, Google GOOGL, and Amazon AMZN that are set to turn big profits and see their stocks climb as these industries expand.
Therefore, a return to growth is likely on the horizon for the industry as a whole, even if some face rough near-term outlooks. So, let’s take a look at three Zacks buy-ranked semiconductor stocks right now.
1. Applied Materials, Inc. AMAT
Shares of Applied Materials have surged over 32% in 2019 to outpace its industry’s 16% average climb. The Semiconductor equipment maker is coming off a better-than-projected second quarter of fiscal 2019. AMAT, like many other chip firms, saw its earnings and revenue slip from the year-ago period. Looking ahead, Applied Materials is projected to see its adjusted fiscal 2019 earnings fall 33% from 2018 on the back of a 16% revenue decline.
However, the company’s 2020 revenues are projected to jump 8.5% above our current-year estimate to help lift earnings 18.3% higher than 2019. Applied Materials has also seen its earnings estimate revision activity trend heavily in the right direction recently, especially for fiscal 2019 and 2020. This positivity, which signals that at least some analysts are more bullish on AMAT’s bottom line, helps the company earn a Zacks Rank #2 (Buy) at the moment. Applied Materials also sports an “A” grade for Value in our Style Scores system and its trading at 12.5X forward 12-month Zacks Consensus EPS estimates. This marks a discount compared its industry’s 17.7X average and its own three-year high of 17.4X. And AMAT is a dividend payer with a yield of 2.02% at the moment.
2. NXP Semiconductors N.V. NXPI
NXP Semiconductors provides secure connectivity solutions for embedded applications, which includes connected vehicles and more. Like AMAT, shares of NPXI are up over 30% this year. The company is also coming off an impressive first-quarter fiscal 2019 earnings beat. The firm reported adjusted EPS of $1.95 per share to crush our $1.55 a share estimate. NXP Semiconductors is projected to see it current-quarter earnings soar 41.6% to reach $1.77 per share.
Meanwhile, NXP’s adjusted full-year revenue is expected to climb by 5.4%. Peeking further ahead, the company’s 2020 earnings are projected to surge 18.3% above our current year estimate. Plus, NXPI has earned a ton of positive earnings estimate revisions for both the coming two quarters, as well as fiscal 2019 and 2020. These recent trends help NXP Semiconductors earn a Zacks Rank #2 (Buy). NXPI also sports a “B” grade for Value. The company’s price/sales ratio of 3.3 represents a discount compared to its industry’s 4.4 average. The Eindhoven, Netherlands-based firm also pays a dividend, with a 1.08% yield at the moment.
3. Amtech Systems, Inc. ASYS
Amtech manufactures capital equipment from silicon wafer handling automation to thermal processing used in semiconductor devices and fabricating solar cells. Shares of ASYS have climbed roughly 30% in 2019, but still rest firmly below $10 per share, which might deter some investors. But along its ‘cheap’ price tag, Amtech’s price/sales ratio of 0.66 represents a huge discount compared to industry’s 2.2 average.
The company has received some positive earnings estimate revisions over the last 30 days, with more positivity coming for fiscal 2019 and 2020. On top of that, the company’s consensus earnings estimates have jumped on the back of these revisions. Amtech is currently a Zacks Rank #1 (Strong Buy) that rocks an “A” grade for Momentum and a “B” for Value. Investors should also note that Amtech has crushed its quarterly earnings estimates in the trailing two quarters, by 133% and 50%, respectively.