President Joe Biden recently signed a landmark bill to provide $52.70 billion in subsidies to boost research and production in the U.S. semiconductor industry. The bill also intends to help the industry with China’s technological and scientific prowess.
The global semiconductor industry registered a sales growth of 13.3% year-over-year to $152.50 billion in the second quarter of 2022. This also marks a 0.5% increase from the prior quarter.
Moreover, with digital transformation set to continue, the semiconductor industry is expected to thrive. The global semiconductor industry is expected to grow 10% in 2022 to over $600 billion for the first time.
Given this backdrop, hidden chip stocks Texas Instruments Incorporated (TXN), Cirrus Logic, Inc. (CRUS), Photronics, Inc. (PLAB), MaxLinear, Inc. (MXL), and CEVA, Inc. (CEVA) might be solid buys before the spending boom hits.
Texas Instruments Incorporated (TXN)
TXN designs, manufactures, and sells semiconductors to electronics designers and manufacturers internationally. It operates through its two broad segments, Analog and Embedded Processing.
In July, TXN declared a quarterly dividend of $1.15 per share of common stock, payable to stockholders on August 16, 2022. This demonstrates the robust cash position of the company.
In June, TXN announced an expansion in its connectivity portfolio by introducing a new family of wireless microcontrollers (MCU). This is expected to help meet the company's customer demand for MCUs.
In May, TXN broke ground on its new 300-mm semiconductor wafer fabrication plants in Sherman, Texas. The company plans to invest in four fabs to meet customer demand over time. This should provide additional operational capacity for the company.
TXN’s revenue increased 13.8% year-over-year to $5.21 billion in the second quarter ended June 30. Its operating profit grew 23% from the year-ago value to $2.72 billion, while its net income improved 18.6% year-over-year to $2.29 billion. The company’s net earnings per common share increased 19.5% from its year-ago value to $2.45.
The consensus EPS estimate of $2.42 for the third fiscal quarter ending September 2022 indicates a 14.1% improvement year-over-year. The consensus revenue is expected to be $5.14 billion for the same period, indicating a rise of 10.7% from the prior-year period. Additionally, TXN has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 7.7% over the past three months and 14.3% over the past month to close its last trading session at $177.71.
TXN’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TXN is rated a B in Sentiment and Quality. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #27 out of 94 stocks. To see additional POWR Ratings for Growth, Value, Momentum, and Stability for TXN, click here.
Cirrus Logic, Inc. (CRUS)
CRUS is a fabless semiconductor company that offers low-power and high-precision mixed-signal processing solutions globally. The company’s portfolio includes portable products, including codecs components, digital signal processors, and SoundClear technology.
For the first quarter of the fiscal year 2023 ended June 25, CRUS’ net sales increased 42% year-over-year to $393.64 million. Its non-GAAP operating income rose 124.9% from the same period last year to $83.41 million. The company’s non-GAAP net income increased 100.2% year-over-year to $64.54 million, while its non-GAAP earnings per share grew 107.4% from the prior-year quarter to $1.12.
Analysts expect CRUS’ revenue to grow 1% year-over-year to $468.38 million for the second quarter ending September 2022. The EPS is expected to be $1.45 for the same period. Additionally, CRUS has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
CRUS’s stock has gained 9.5% over the past three months and 15.5% over the past month to close its last trading session at $83.22.
CRUS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system.
CRUS has a B grade for Value and Quality. It is ranked #11 in the Semiconductor & Wireless Chip industry. Click here to see the additional POWR Ratings for CRUS (Growth, Momentum, Stability, and Sentiment).
Photronics, Inc. (PLAB)
PLAB manufactures and sells photomask products and services internationally. The company offers its products to semiconductor and FPD manufacturers, designers, and foundries through its sales personnel and customer service representatives.
For the second quarter ended May 1, PLAB’s revenue was $204.51 million, up 28% year-over-year. Its operating income rose 150.4% from the year-ago value to $52.11 million. The company’s net income increased 178.4% year-over-year to $45.44 million, while its earnings per share grew 188.2% from the prior-year quarter to $0.49.
Street EPS estimate for the third quarter (ended July 2022) of $0.50 indicates a 78.6% year-over-year growth. Street revenue estimate of $210 million for the same quarter reflects a rise of 23.1% from the prior-year period. PLAB has topped Street EPS estimates in each of the trailing four quarters.
The stock has gained 68.2% over the past year and 53.1% over the past three months to close its last trading session at $22.72.
PLAB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our POWR Ratings system.
PLAB has a B grade for Growth, Value, Momentum, Sentiment, and Quality. It is ranked #5 in the same industry. Click here to see the additional rating for PLAB (Stability).
MaxLinear, Inc. (MXL)
MXL offers radiofrequency (RF), high-performance analog, and mixed-signal communications systems-on-chip solutions (SoCs) used for the connected home, wired and wireless infrastructure, as well as industrial and multi-market applications.
MXL recently unveiled Panther III, the latest in the company’s Panther series of storage accelerators. The availability of the new offering is expected to bolster the company’s revenue stream.
In June, MXL announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 regarding its previously announced acquisition of Silicon Motion Technology Corporation (SIMO) in cash and stock transaction. The proposed acquisition might enhance the company’s operative capability.
MXL’s net revenue came in at $280.01 million for the second quarter of 2022, ended June 30, representing a 36.3% year-over-year growth. Its non-GAAP income from operations grew 86.4% from the prior-year quarter to $90.14 million, while its non-GAAP net income rose 114.8% from the same period last year to $89.34 million. The non-GAAP net income per share increased 109.4% from the prior-year period to $1.11.
Analysts expect MXL’s revenue for the third quarter ending September 2022 to be $284.93 million, indicating a 24% year-over-year growth. The company’s EPS for the same quarter is expected to increase 38.2% from the prior-year quarter to $1.04. Additionally, MXL has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
MXL has gained 7.2% over the past month to close its last trading session at $37.67.
It is no surprise that MXL has an overall B rating, which translates to Buy in our POWR Rating system. The stock has an A grade for Growth and a B for Value and Quality. It is ranked #8 in the Semiconductor & Wireless Chip industry.
Beyond what we’ve stated above, we have also given MXL grades for Momentum, Stability, and Sentiment. Get all the MXL ratings here.
CEVA, Inc. (CEVA)
CEVA licenses wireless connectivity and smart sensing technologies to semiconductor and original equipment manufacturer (OEM) companies worldwide. The company licenses its technology through a direct sales force.
On August 9, CEVA announced that its cumulative royalty-bearing chip shipments, including CEVA IP, surpassed 15 billion units during the second quarter. This is a significant milestone.
For the second quarter of 2022, ended June 30, CEVA’s total revenues increased 9% year-over-year to $33.20 million. Its net financial income rose 16% from the prior-year period to $413 thousand. The company’s non-GAAP total operating income and non-GAAP earnings per share came in at $4.63 million and $0.18.
Street EPS estimate for the fiscal third quarter (ending September 2022) of $0.22 reflects a rise of 7.5% year-over-year. Likewise, Street revenue estimate for the same quarter of $36.50 million indicates an improvement of 11.3% from the prior-year period. Additionally, CEVA has topped consensus EPS estimates in each of the trailing four quarters.
Over the past month, CEVA’s stock has declined 6% to close its last trading session at $32.28.
This promising prospect is reflected in CEVA’s POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
CEVA has an A grade for Growth and a B grade for Quality. It is ranked #9 in the same industry. Click here to see the additional POWR Ratings for CEVA (Value, Momentum, Stability, and Sentiment).
TXN shares were trading at $182.58 per share on Wednesday afternoon, up $4.87 (+2.74%). Year-to-date, TXN has declined -1.17%, versus a -11.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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