Chicago, IL – April 11, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: STMicroelectronics STM, Microchip Technology MCHP, Analog Devices ADI and Lam Research Corp. LRCX.
Global semiconductor sales have been slowing down over the past few months. According to the latest report from Semiconductor Industry Association (SIA) global semiconductor industry sales were $39.7 billion in February, with a sequential decrease of 4% and a whopping 20.7% drop from the prior-year figure of $50 billion. This marked the sixth consecutive sequential decline.
SIA president and CEO, John Neuffer cited short-term market cyclicality and macroeconomic headwinds being the reasons behind the slash. A number of interrelated issues, like rising prices, geopolitical tensions and pandemic aftereffects, have combined to cause the current short-term decline. These elements have influenced consumer spending, and resulted in macroeconomic uncertainty and swings in semiconductor demand. Also, currency fluctuations and the fears of global recession are negatively impacting the semiconductor industry.
Nonetheless, Neuffer stated that "the market's medium- and long-term prospects remain bright, thanks to growing demand across a range of end markets."
Semiconductors are the backbone of the current-day technology-driven economy. Digitization across industries, the adoption of cloud computing, and the integration of artificial intelligence and machine learning are likely to fuel demand for semiconductors.
The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to propel further growth. Apart from this, blockchain, the Internet of Things, autonomous vehicles, augmented reality/virtual reality and wearables are other growth prospects.
It is noteworthy that the semiconductor market registered growth of 3.2% to reach an all-time high of $573.5 billion in 2022 from $555.9 billion in 2021, according to the report released by SIA on Feb 3. Owing to robust demand, 2022 has been one of the best years for the market.
Considering the bright prospect, it makes sense to invest in semiconductor stocks like — STMicroelectronics, Microchip Technology, Analog Devices and Lam Research Corp.— for long-term gains.
The abovementioned semiconductor stocks are well-positioned to benefit from the long-term growth prospect of the market. Apart from having solid fundamentals, these stocks also have favorable combinations of a VGM Score of A or B and a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Per Zacks' proprietary methodology, stocks with such favorable combinations offer solid investment opportunities.
STMicroelectronics is a global independent semiconductor company, which designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of microelectronic applications, including telecommunications systems, computer systems, consumer products, automotive products, and industrial automation and control systems.
STMicroelectronics is witnessing growing demand across its segments, with particular strength in the automotive, and factory automation and industrial infrastructure markets. In fourth-quarter 2022, the company reported 38.4% year-over-year growth and 8.5% sequential growth in revenues from the Automotive and Discrete Group segment. This was due to ongoing electrification and digitalization, increased semiconductor content in legacy auto, and replenishment across the automotive supply chain.
STM currently has a VGM Score of A and a Zacks Rank of 2. The Zacks Consensus Estimate for the company's first-quarter 2023 earnings has been revised upward by 10 cents to 96 cents per share over the past 90 days, suggesting a 21.5% year-over-year increase. For 2023, the consensus mark for earnings has improved by a penny to $4.05 per share over the past 30 days, indicating a 3.3% year-over-year decline.
Microchip Technology develops and manufactures microcontrollers, memory, and analog and interface products for embedded control systems, which are small, low-power computers designed to perform specific tasks. It is one of the fastest-growing providers of 8-bit, 16-bit and 32-bit microcontrollers in the world.
Microchip's microcontroller business continues to outperform the industry, enabling it to gain a significant market share. The company is increasingly expanding its touch business beyond handsets and tablets in areas such as automotive industrial applications. Its Analog business is one of the largest analog franchises in the market.
This Zacks Rank #2 company continues to develop and introduce a wide range of innovative and proprietary new linear, mixed-signal, power, interface, and timing products to fuel the growth of the analog business. To further capitalize on this burgeoning business potential, MCHP is developing and introducing a wide range of innovative and proprietary products.
Microchip has a VGM Score of A. The Zacks Consensus Estimate for fourth-quarter fiscal 2023 earnings is pegged at $1.62 per share, moving northward by a penny in the past 60 days. The figure estimates 20% year-over-year growth. The consensus mark for fiscal 2023 earnings is pegged at $6, which has also moved up by a penny over the past 60 days and indicates 30.2% year-over-year growth.
Analog Devices is an original equipment manufacturer of semiconductor devices, specifically, analog, mixed-signal and digital signal processing (DSP) integrated circuits (ICs). This Zacks Rank #2 company's product line is composed of amplifiers and comparators, analog-to-digital converters, digital-to-analog converters, video encoders and decoders, embedded processing products and DSPs, micro-electromechanical systems and temperature sensors, radio frequency/intermediate frequency components and converters, power and thermal management ICs, audio/video converters, amplifiers, CODECs, filters and processors.
Analog Devices is the second-largest producer of analog chips after Texas Instruments. This VGM Score B company is anticipated to benefit from its strong market position in high-performance analog, especially in the industrial, communications infrastructure and consumer markets. Further, strong momentum across the electric vehicle space on the back of its robust Battery Management System solutions is a positive. The company has been investing in products for the automotive market, mainly because the electronic content in automobiles, particularly in the safety and infotainment areas, is on the rise.
The Zacks Consensus Estimate for Analog Devices' second-quarter fiscal 2023 earnings has been revised upward by 33 cents to $2.74 per share over the past 60 days, indicating 14.2% growth. For fiscal 2023, the consensus mark for ADI's earnings has been revised upward by 91 cents to $10.60 per share, suggesting 10.8% growth.
Lam Research Corp. supplies wafer fabrication equipment and services to the semiconductor industry. Based in CA, the company's products are used by semiconductor manufacturers in front-end and wafer-level packaging processes, creating memory, microprocessors, and other logic ICs for a broad range of electronic devices.
The company continues to benefit from strength across systems and customer support businesses. Rising NAND requirement in accelerating 5G migration, video, and new game consoles is driving its top-line growth. Strong momentum in the foundry and logic segment, owing to the growing traction among etch and deposition technologies, is a major positive for LCRX.
Lam Research has a Zacks Rank #2 with a VGM Score of B. The Zacks Consensus Estimate for Lam Research's third-quarter fiscal 2023 earnings has been revised downward by 3 cents to $6.53 per share over the past 60 days, indicating an 11.8% drop. For fiscal 2023, the consensus mark for LCRX's earnings has been revised upward by a penny to $33.30 per share over the past 60 days, suggesting mere 0.5% growth.
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