The current global semiconductor shortage has been intensifying due to supply chain disruptions and heightened demand. A recent MarketWatch report stated that rising demand amid the remote working environment and 5G rollout caused a near sell-out of 2022’s chip supply as of January 24, 2022. Against this backdrop, semiconductor manufacturer Infineon expects the semiconductor shortage to continue until 2023.
With hefty capital investments to boost semiconductor production, overall output has been increasing since the second half of last year. The Semiconductor Industry Association stated that global semiconductor sales increased 24% year-over-year in October 2021, and U.S. semiconductor sales witnessed 29.2% year-over-year growth. The World Semiconductor Trade Statistics (WSTS) expects the global semiconductor market to grow 8.8% year-over-year in 2022 to more than $602 billion.
Given these factors, we think it could be wise to invest in semiconductor stocks Micron Technology, Inc. (MU), Diodes Incorporated (DIOD), Silicon Motion Technology Corporation (SIMO), and Photronics, Inc. (PLAB). The stocks are currently trading at discounts to their peers but hold solid growth potential.
Click here to checkout our Semiconductor Industry Report for 2022
Micron Technology, Inc. (MU)
MU in Boise, Idaho, designs, manufactures, and sells memory and storage goods in the U.S. and worldwide. It operates in four segments: Mobile Business Unit; Compute and Networking Business Unit; Storage Business Unit; and Embedded Business Unit.
This month, MU announced that it had commenced shipments of the world’s first 176-layer QLC NAND SSD. This product delivers the industry’s leading storage density and advanced performance. The company has also unveiled its 2400 PCIe Gen4 Client SSD. The introduction of new innovative products is expected to provide MU a competitive advantage, a new customer base, and better profits.
Last December, MU announced the opening of its Art Memory Design Center in Atlanta. This new site is expected to open for business this month. MU is expanding its company’s reach into the Southeast, enabling the company to increase its access to Atlanta’s technical talent to advance its business innovation in memory design.
MU’s revenue increased 33.2% year-over-year to $7.69 billion in its fiscal first quarter, ended Dec. 2, 2021. MU’s operating income grew 180.1% year-over-year to $2.73 billion. Its net income improved 175.5% year-over-year to $2.47 billion. And the company’s EPS increased 176.9% from the year-ago value to $2.16.
MU is relatively undervalued compared to its peers. In terms of forward non-GAAP P/E, MU is currently trading at 9.14x, which is 60.3% lower than the 23x industry average. Its 2.84 forward Price/Sales multiple is 23.2% lower than the 3.69x industry average of 3.69x.
The company has an impressive growth history also; its total assets have improved at an 11.2% CAGR over the past three years.
A $7.52 billion consensus revenue estimate for the fiscal second-quarter, ending February 2022, represents 20.6% year-over-year growth. The $1.97 consensus EPS estimate for the current quarter indicates 101.1% year-over-year growth. Also, MU has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
Over the past six months, the stock has declined 3.6% in price to close yesterday’s trading session at $82.95.
MU’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
MU has an A grade for Value and a B grade for Growth and Quality. Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #7 of 100 stocks. To see additional POWR Ratings (Momentum, Stability, and Sentiment) for MU, click here.
Diodes Incorporated (DIOD)
DIOD in Plano, Tex., is a global manufacturer and supplier of application-specific products in the discrete, analog, logic, and mixed-signal semiconductor markets. The company sells its products to the consumer electronics, communications, computing, industrial, and automotive markets.
Last November, DIOD introduced the AP7347DQ low dropout (LDO) voltage regulator. The regulator delivers superior PSRR and is optimized for noise-sensitive power-related automotive applications. This product is expected to provide performance advantages and allow DIOD to boost growth and increase revenue streams.
Early last November, DIOD introduced a portfolio of automotive MOSFETs. These are high-current rated and are ideal for use in high-reliability power applications. Its introduction of superior products might increase DIOD’s customer base and boost profits.
In its fiscal 2021 third quarter, ended September 30, DIOD’s total revenues increased 52.3% year-over-year to $471.40 million. Its gross profit increased 63.1% year-over-year to $181.2 million. The company’s EBITDA rose 80.9% from the same period last year to $114.5 million. DIOD’s adjusted net income increased 105.2% from its year-ago value to $67.30 million. And the company’s adjusted income per share increased 137.1% from the year-ago value to $1.47.
DIOD is trading at a discount to its peers. In terms of forward non-GAAP P/E, DIOD is currently trading at 17.07x, which is 25.8% lower than the 23x industry average. And its 2.16 forward Price/Sales multiple is 41.6% lower than the 3.69x industry average.
The company’s financials have grown substantially over the past three years. DIOD’s revenues and net income have risen at CAGRs of 12.8% and 63.9%, respectively, over the past three years. And its EPS has grown at a 67.8% CAGR, while its levered free cash flow has improved at a 19.1% CAGR over the past three years.
Analysts expect DIOD’s revenue for its fiscal fourth quarter, ended December 31, 2021, to come in at $476.20 million, representing a 35.9% rise year-over-year. The Street expects the company’s EPS for the fourth quarter to be $1.47, representing a 98.6% increase year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
DIOD’s shares have declined 18.0% in price over the past month and closed yesterday’s trading session at $89.09.
DIOD has an overall A rating, which translates to Strong Buy in our POWR Ratings system. It has an A grade for Value and a B grade for Growth and Sentiment. It is ranked #4 of 100 stocks in the A-rated Semiconductor & Wireless Chip industry. Click here to see DIOD ratings for Momentum, Stability, and Quality.
Silicon Motion Technology Corporation (SIMO)
SIMO in Zhubei City, Taiwan, is a global manufacturer and supplier of NAND flash controllers for solid-state storage devices. It develops and supplies SSDs used in PCs and other devices; enterprise-grade storage in data centers; and small form-factor specialized SSDs in industrial and automotive applications.
Last December, SIMO announced a share repurchase program. The company intends to repurchase up to $200 million of its American Depositary Shares (ADSs) over a six-month period, effective immediately. This share repurchase program might raise the stock’s price.
In its fiscal year 2021 third quarter, ended Sept. 30, SIMO’s total revenues increased 101.7% year-over-year to $254.20 million. Its gross profit increased 106.5% year-over-year to $127.80 million. The company’s operating income rose 157.9% from the same period last year to $74.8 million. And its earnings per share increased 123.7% from the year-ago value to $1.70.
In terms of forward non-GAAP P/E, SIMO is currently trading at 14.28x, which is 37.9% lower than the 23.00x industry average. Its 3.28 forward Price/Sales multiple is 11.2% lower than the 3.69x industry average. And SIMO’s 10.20 forward EV/EBITDA ratio compares with the 14.54 industry average.
SIMO’s revenues and net income have risen at CAGRs of 13.9% and 14.9%, respectively, over the past three years. Its EPS has grown at a 16.4% CAGR, while total assets have increased at a 10.9% CAGR over the past three years.
A $262.52 million consensus revenue estimate for its fiscal fourth quarter, ended December 2021 represents 82.4% year-over-year growth. And the $1.76 consensus EPS estimate for the current quarter indicates104.7% year-over-year growth. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
Shares of SIMO have declined 2.4% in price over the past month and closed yesterday’s trading session at $87.25.
SIMO has an overall A rating, which translates to Strong Buy in our POWR Ratings system. It has an A grade for Growth and B for Value, Sentiment, and Quality. It is ranked #8 of 100 stocks in the Semiconductor & Wireless Chip industry. Click here to see SIMO ratings for Momentum and Stability.
Note that SIMO is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Photronics, Inc. (PLAB)
PLAB manufactures and sells photomask products and services in the U.S. and internationally. The Brookfield, Conn.-based company offers photomasks that are used in integrated circuits (ICs), flat panel displays (FPDs), and to transfer circuit patterns onto electrical and optical components.
PLAB’s revenue increased 21.4% year-over-year to $181.29 million in its fiscal fourth quarter, ended Oct.31, 2021. PLAB’s operating income grew 123.7% year-over-year to $33.52 million. Its net income improved 233.7% year-over-year to $28.63 million. And the company’s EPS attributable to shareholders increased 230.0% from the year-ago value to $0.33.
In terms of forward non-GAAP P/E, PLAB is currently trading at 13.45x, which is 41.5% lower than the 23x industry average. Its 1.42 forward Price/Sales multiple is 61.6% lower than the 3.69x industry average. PLAB’s 4.65 forward EV/EBITDA ratio compares with the 14.54 industry average.
PLAB’s revenues and net income have risen at CAGRs of 7.4% and 9.7%, respectively, over the past three years. Its EPS has grown at a 14.8% CAGR, while total assets have increased at a 3.3% CAGR over the past three years.
The $183.1 million consensus revenue estimate for its fiscal first quarter, ending January 2022 represents 20.4% year-over-year growth. The consensus $0.31 EPS estimate for the current quarter indicates 141% year-over-year growth. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
Over the past month, the stock has declined 0.8% in price to close yesterday’s trading session at $17.87.
PLAB has an overall B rating, which translates to Buy in our POWR ratings system. PLAB has a grade of A for Growth, and a B for Value and Momentum. Within the Semiconductor & Wireless Chip industry, it is ranked #9. To see additional POWR Ratings (Quality, Stability, and Sentiment) for PLAB, click here.
Click here to checkout our Semiconductor Industry Report for 2022
MU shares were trading at $80.55 per share on Tuesday morning, down $2.40 (-2.89%). Year-to-date, MU has declined -13.53%, versus a -9.42% 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.
4 Buy the Dip Semiconductor Stocks That Offer Growth and Value StockNews.com
