The robust recovery in chip demand across end-use sectors like electronics and automotive, growing adoption of advanced technologies such as generative AI and high-performance computing (HPC), and supportive government funding and incentives are key factors that will contribute to the semiconductor industry’s rebound in 2024.
With the industry’s promising prospects, it could be wise to invest in fundamentally sound semiconductor stocks Everspin Technologies, Inc. (MRAM), Nikon Corporation (NINOY), and Cirrus Logic, Inc. (CRUS) for potential gains.
After challenging market conditions in 2023, the semiconductor industry is poised for a solid rebound this year. According to the latest forecast by Gartner, the global semiconductor industry is expected to grow 16.8% in 2024 to reach a staggering $624 billion. After a record 38.8% decline last year, the worldwide memory market will recover in 2024 by growing 66.3%.
The semiconductor industry’s bright prospects are driven by extensive chip usage in a wide range of end-use applications across multiple sectors like electronics, automotive, communications, industrial equipment, and energy. Furthermore, the growing adoption of advanced digital technologies like AI, IoT, and machine learning would foster the sector’s growth.
For instance, developments in generative AI and large language models (LLMs) are driving demand for the deployment of high-performance GPU-based servers and accelerators in data centers. Gartner analysts estimate that the integration of AI techniques into data center applications will result in more than 20% of new servers by 2027, spurring chip demand.
As per SEMI’s recent quarterly World Fab Forecast report, the global semiconductor capacity is projected to increase by 6.4% this year to top the 30 million wafers per month (wpm) mark for the first time after rising 5.5% to 29.6 wpm in 2023.
In addition, in August 2022, President Joe Biden signed the CHIPS Act of 2022, a law that allocated about $52.70 billion over the next five years to boost domestic manufacturing and research and development (R&D)of semiconductors in the United States.
As part of the CHIPS Act, semiconductor companies will get 25% investment tax credits for investing in chip manufacturing or specialized tooling equipment.
Given these encouraging trends, let’s look at the fundamentals of the three best Semiconductor & Wireless Chip stocks, beginning with the third choice.
Stock #3: Cirrus Logic, Inc. (CRUS)
CRUS is a fabless semiconductor company that engages in developing low-power, high-precision mixed-signal processing solutions. It provides audio products, including codec components, smart codecs, boosted amplifiers, standalone digital signal processors, and SoundClear technology. It sells products via direct sales force and external sales representatives.
On August 2, 2023, CRUS introduced an advanced audio solution to help ease PC manufacturers’ migration to the MIPI SoundWire® interface (1.2.1 specification). Its new audio amplifier/codec solution is part of SoundWire-ready Intel® reference design, providing PC OEMs a scalable, frustration-free migration to new audio specifications.
Along with this newly launched audio solution optimized for the PC platform, CRUS is collaborating with industry leaders Intel Corporation (INTC) and Microsoft Corporation (MSFT) to help ease the transition to the SoundWire interface and scalable architecture to prove even better audio in next-generation laptop designs.
In terms of forward Price/Sales, CRUS is trading at 2.60x, 11.3% lower than the industry average of 2.94x. Likewise, the stock’s forward EV/EBIT multiple of 11.09 is 46.9% lower than the industry average of 20.91. Also, its forward non-GAAP PEG of 7.76x is considerably lower than the industry average of 2.08x.
For the fiscal 2024 second quarter that ended September 23, 2023, CRUS reported net sales of $481.06 million. The company’s non-GAAP gross profit increased 54.7% from the previous quarter to $246.96 million. Its non-GAAP net income and non-GAAP EPS were $101.56 million and $1.80 per share, up 167.1% and 168.6% from the prior quarter, respectively.
In addition, the company’s total assets came in at $2.10 billion as of September 23, 2023, compared to $2.06 billion as of March 25, 2023.
As per the business outlook for the third quarter of fiscal 2024, the company’s revenue is expected to range between $510 million and $570 million. Its gross margin is expected to be between 49% and 51%.
Analysts expect CRUS’ revenue and EPS for the fiscal year (ending March 2025) to increase 8.4% and 19.4% year-over-year to $1.81 billion and $6.21, respectively. Further, the company has surpassed the consensus revenue and EPS estimates in all four trailing quarters, which is remarkable.
CRUS’ stock has gained 1.7% over the past six months to close the last trading session at $80.68.
CRUS’ bright prospects are reflected in its POWR Ratings. 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, each weighted to an optimal degree.
CRUS’ stock has a B grade for Momentum, Value, and Sentiment. Within the Semiconductor & Wireless Chip industry, CRUS is ranked #19 of 91 stocks.
Click here to access additional ratings of CRUS (Stability, Quality, and Growth).
Stock #2: Nikon Corporation (NINOY)
Headquartered in Minato, Japan, NINOY manufactures and sells optical instruments internationally. The company operates through the Imaging Products Business; Precision Equipment Business; Healthcare Business; and Industrial Equipment and Other segments. It offers products like digital SLR cameras, FPD lithography systems, biological microscopes, etc.
On January 9, NINOY announced a collaboration with Agence France-Presse (AFP), a news agency based in Paris, France, to initiate the practical verification of an image provenance function being developed by Nikon in the field of journalism.
By developing an image provenance function, NINOY is committed to ensuring image authenticity, aiming to protect individuals and enterprises in the imaging industry. This function is planned to be included in the upcoming products.
Also, on the same day, NINOY and Unistellar SAS, France, announced the release of the smart telescopes ODYSSEY PRO and ODYSSEY. These were jointly developed by the companies and sold by Unistellar SAS.
The master joint development agreement for smart telescopes was announced in July 2021 by Nikon and Unistellar and has been advancing innovative solutions to be provided for the consumer astronomical observation field.
In terms of forward EV/Sales, NINOY is trading at 0.70x, 41.1% lower than the industry average of 1.19x. The stock’s forward EV/EBITDA multiple of 6.57 is 33.4% lower than the industry average of 9.87. Further, its forward Price/Sales of 0.76x is 14.7% lower than the industry average of 0.89x.
NINOY’s revenue for the first half that ended September 30, 2023, increased 14.9% year-over-year to ¥331.30 billion ($2.23 billion). Its gross profit grew 7.5% from the year-ago value to ¥142.07 billion ($959.52 million). The company’s profit for the period and EPS came in at ¥9.33 billion ($63.04 million) and ¥28.15, respectively.
In addition, NINOY’s total assets as of September 30, 2023, were ¥1.10 trillion ($7.41 billion), compared to ¥1.05 trillion ($7.08 billion) as of March 31, 2023.
The company updated its consolidated financial forecasts for the fiscal year ending March 31, 2024, affirming a revenue of ¥690 billion ($4.66 billion).
Street expects NINOY’s revenue for the fiscal year (ending March 2024) to increase 48.6% year-over-year to $4.55 billion. Likewise, the company’s revenue for the fiscal year 2025 is expected to increase 6.8% year-over-year to $4.85 billion.
NINOY’s shares have gained 4.3% over the past month and 5.3% over the past year to close the last trading session at $9.96.
NINOY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Momentum, Value, and Stability. Within the Semiconductor & Wireless Chip industry, NINOY is ranked #9 of 91 stocks.
In addition to the POWR Ratings we’ve stated above, we also have NINOY ratings for Growth, Sentiment, and Quality. Get all NINOY ratings here.
Stock #1: Everspin Technologies, Inc. (MRAM)
MRAM is a manufacturer and seller of magnetoresistive random access memory (MRAM) products worldwide. It provides Toggle MRAM, spin-transfer torque MRAM, tunnel magneto resistance sensor products, and foundry services for MRAM products. It offers its products for applications, including industrial, medical, automotive, and data center markets.
On October 17, MRAM expanded its flagship industrial, high-density STT-MRAM product family, the EMxxLX. The EMxxLX product is the highest-performing persistent memory available right now. It is ideal for electronic systems such as industrial IoT, network/enterprise infrastructure, aeronautics/avionics, etc.
The new extended EMxxLX device allows the highest combination of performance, endurance, and retention. The expansion of its EMxxLX MRAM product line might extend the company’s market reach and drive its profitability.
In terms of forward non-GAAP P/E, MRAM is trading at 16.79x, 31.8% lower than the industry average of 24.64x. Furthermore, the stock’s forward EV/EBIT multiple of 14.71 is 29.6% lower than the industry average of 20.91. Also, the stock’s forward EV/Sales of 2.45x is lower than the industry average of 2.91x.
During the third quarter that ended September 30, 2023, MRAM’s total revenue increased 8% year-over-year to $16.47 million. Its gross profit grew 10.6% from the prior year’s quarter to $9.92 million. The company’s net income and EPS increased 27.8% and 22.2% year-over-year to $2.44 million and $0.11, respectively.
In addition, the company’s adjusted EBITDA increased 18.7% from the year-ago value to $4.01 million.
For the fourth quarter of fiscal 2023, Everspin expects total revenue to range between $15.40 million to $16.40 million. The company’s net income per share is expected to be between $0.01 and $0.06.
Analysts expect MRAM’s revenue and EPS for the quarter (ended December 2023) to increase 1.3% and 43.9% year-over-year to $15.90 million and $0.12, respectively. Further, the company has an impressive earnings surprise history as it has topped consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of MRAM have surged 38.4% over the past year to close the last trading session at $8.73.
MRAM’s POWR Ratings reflect this robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
MRAM’s stock has an A grade for Sentiment and a B for Momentum, Value, and Quality. The stock is ranked #3 among the 91 stocks in the Semiconductor & Wireless Chip industry.
Click here to access additional MRAM ratings for Growth and Stability.
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CRUS shares were unchanged in premarket trading Monday. Year-to-date, CRUS has declined -3.02%, versus a 1.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 Semiconductor Stocks for Weekly 2024 Profits StockNews.com
