The chip industry’s prospects appear promising due to continued consumer demand, technological advancements, and increased investments. Given the industry’s solid growth prospects, investors could consider buying fundamentally strong chip stocks: ChipMOS TECHNOLOGIES INC. (IMOS), Cirrus Logic, Inc. (CRUS), and Everspin Technologies, Inc. (MRAM).
Chip demand is expected to remain robust due to growing demand from the consumer electronics, defense, and automobile sectors, upward trends in generative AI, the growing popularity of cloud computing, and the rising importance of hyperscalers.
The Semiconductor Industry Association (SIA) announced that global semiconductor industry sales totaled $46.20 billion in February 2024, up 16.3% from $39.70 billion in February last year.
According to the SIA, global semiconductor sales are expected to increase 13.1% to $588.40 billion in 2024. In a survey of semiconductor executives conducted by KPMG and GSA, the majority of the 172 executives remain enthusiastic about the industry’s revenue growth, which is expected to be driven by advances in artificial intelligence and automotive technology.
Moreover, the global semiconductor market is projected to grow at a CAGR of 6.3%, resulting in a value of $1.12 trillion by 2033. Investors’ interest in chip stocks is evident from the VanEck Semiconductor ETF’s (SMH) 76.3% returns over the past year.
In light of these encouraging trends, let’s examine the fundamentals of the three Semiconductor & Wireless Chip stocks, beginning with the third pick.
Stock #3: ChipMOS TECHNOLOGIES INC. (IMOS)
Based in Hsinchu City, Taiwan, IMOS researches, develops, manufactures, and sells high-integration and high-precision integrated circuits and related assembly and testing services. It operates through Testing, Assembly, Testing, and Assembly for LCD, OLED, and Other Display Panel Driver Semiconductors, Bumping, and Others segments.
IMOS’ trailing-12-month Return on Total Assets of 4.10% is 174.1% higher than the industry average of 1.50%. Its 8.87% trailing-12-month net income margin is 234.8% higher than the 2.65% industry average. Also, its 14.39% trailing-12-month CAPEX / Sales is 523% higher than the 2.31% industry average.
During the fourth quarter that ended December 31, 2023, IMOS’ revenue increased 22.2% year-over-year to $187 million. Its net profit attributable to equity holders of IMOS grew 207.8% and 100% from the prior year’s quarter to $15.70 million and $0.02 per common share, respectively.
IMOS’ revenues for the first quarter, which ended March 31, 2024, increased 17.7% year-over-year to $169.70 million. The company has yet to publish its consolidated financial report for the first quarter.
Street expects IMOS’ revenue for the quarter ended March 31, 2024, to increase 8.5% year-over-year to $162.61 million. Over the past nine months, the stock has gained 33.7% to close the last trading session at $29.85.
IMOS’ POWR Ratings reflect this promising outlook. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
IMOS has an A grade for Momentum and a B for Value and Stability. Within the Semiconductor & Wireless Chip industry, it is ranked #3 out of 91 stocks. To see the additional ratings of IMOS for Growth, Sentiment, and Quality, click here.
Stock #2: Cirrus Logic, Inc. (CRUS)
CRUS is a fabless semiconductor company that develops low-power, high-precision mixed-signal processing solutions both domestically and internationally. The company provides audio solutions, including integrated audio components, smart codecs, amplifiers, DSPs, and SoundClear technology for enhanced user experiences.
CRUS’ trailing-12-month EBIT margin of 18.25% is 283.2% higher than the 4.76% industry average. Its trailing-12-month EBITDA margin of 21.33% is 126.6% higher than the 9.41% industry average. Additionally, its 10.65% trailing-12-month Return on Total Capital is 328.4% higher than the 2.49% industry average.
For the fiscal third quarter that ended December 30, 2023, CRUS’ net sales rose 4.8% year-over-year to $618.98 million. The company’s non-GAAP operating profit increased 10.6% over the prior-year quarter to $192.23 million. Its non-GAAP net income and EPS amounted to $160.63 million and $2.89 per share, up 18.3% and 20.4% year-over-year, respectively.
For fiscal 2025, CRUS’ EPS and revenue are expected to increase 3.6% and 3.6% year-over-year to $6.22 and $1.80 billion, respectively. It surpassed the consensus EPS and revenue estimates in each of the trailing four quarters. Over the past six months, the stock has gained 22.1% to close the last trading session at $88.56.
CRUS’ strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #2 in the same industry. It has a B grade for Growth, Value, Momentum, Sentiment, and Quality. Click here to see the CRUS’ rating for Stability.
Stock #1: Everspin Technologies, Inc. (MRAM)
MRAM manufactures and sells magnetoresistive random access memory (MRAM) products, including Toggle MRAM, spin-transfer torque MRAM, and tunnel magnetoresistance sensor products. The company serves original equipment, contract, and design manufacturers.
MRAM’s trailing-12-month EBIT margin of 9.23% is 93.8% higher than the industry average of 4.76%. Its 19.55% trailing-12-month Return on Common Equity is 433.5% higher than the 3.67% industry average. Additionally, its 14.20% trailing-12-month net income margin is 436% higher than the 2.65% industry average.
In the fourth quarter that ended December 31, 2023, MRAM’s revenue increased 6.4% year-over-year to $16.70 million. Its adjusted EBITDA rose 71.4% from the year-ago value to $3.60 million. The company’s net income and comprehensive income grew significantly from the prior year’s quarter to $2 million, while net income per common share increased 200% from the year-ago value to $0.09.
Analysts expect MRAM’s revenue for the fiscal year ending December 31, 2025, to increase 16.6% year-over-year to $70 million. It surpassed EPS and revenue estimates in each of the four trailing quarters. MRAM shares have gained 19.9% over the past year, closing the last trading session at $7.71.
It’s no surprise that MRAM has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
It has an A grade for Value and Sentiment and a B for Momentum and Quality. It is ranked first in the Semiconductor & Wireless Chip industry. Beyond what is stated above, we’ve also rated MRAM for Growth and Stability. Get all MRAM ratings here.
What To Do Next?
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CRUS shares were trading at $87.89 per share on Monday morning, down $0.67 (-0.76%). Year-to-date, CRUS has gained 5.65%, versus a 8.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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