Semiconductors find critical usage in several products manufactured by multiple sectors. Moreover, they are solid building blocks of cutting-edge technologies. With solid demand for chips worldwide and supportive government initiatives and funding for chip manufacturing and R&D, the industry’s outlook looks promising.
Given the industry tailwinds, it could be wise to invest in top chip stocks ROHM Co., Ltd. (ROHCY), ChipMOS TECHNOLOGIES INC. (IMOS), and Park Aerospace Corp. (PKE) for potential gains.
With the growing usage of chips for various applications across sectors, including consumer electronics, automotive, healthcare, manufacturing, agriculture, and telecom and IT, the semiconductor industry is well-positioned for significant growth in the long term.
Moreover, the global market for electric vehicles (EVs) has grown rapidly in recent years and is projected to expand at a fast pace over the upcoming years. EVs require highly sophisticated chips like SiC chips, boosting the industry’s prospects. The global electric vehicle market is expected to reach $1.72 trillion by 2032, expanding at a CAGR of 23.1%.
Further, semiconductors are essential in enabling emerging technologies like AI, 5G, autonomous systems, and quantum computing. With semiconductors playing a vital role in powering the development and deployment of AI at scale, AI chips, including GPUs, FPGAs, and ASICs, are in high demand.
The global AI chip market is projected to grow at a CAGR of 28.8% between 2023 and 2028, reaching a $83.62 billion market size by 2028.
According to the Semiconductor Industry Association (SIA), sales of semiconductors amounted to $124.50 billion in the second quarter of 2023, up 4.7% over the first quarter of this year. Solid second-quarter results provide optimism that the chip market will continue to rebound during the second half of the year.
Favorable government initiatives and funding would considerably fuel the chip industry’s expansion. The White House just marked the one-year anniversary of the signing of “Chips for America” legislation providing $52.70 billion in subsidies for semiconductor manufacturing, research, and workforce development across the United States.
As per a report by Precedence Research, the global semiconductor market is estimated to reach $1.88 trillion by 2032, exhibiting a CAGR of 12.3% during the forecast period (2023-2032).
In light of these encouraging trends, let's look at the fundamentals of the three best Semiconductor & Wireless Chip stocks, beginning with number 3.
Stock #3: Park Aerospace Corp. (PKE)
PKE specializes in developing and manufacturing advanced composite materials for the aerospace market in North America, Asia, and Europe. Its offerings include film adhesives, lightning strike protection materials, specialty ablative materials for rocket motors, and materials for radome applications. It also designs and fabricates various composite parts, structures, and assemblies.
On August 4, the Board of Directors of PKE paid a regular quarterly dividend of $0.125 to shareholders of record at the close of business on July 3, 2023. The company has paid quarterly cash dividends for 38 consecutive years without ever skipping a dividend payment or reducing the dividend amount.
PKE pays a $1.35 dividend annually, which translates to a yield of 3.61% at the current share price. Its four-year average dividend yield is 9.38%. Its dividend payouts have increased at CAGRs of 4% and 2.4% over the past three and five years, respectively. Moreover, the company has paid nearly $583 million in cash dividends since the beginning of its 2005 fiscal year.
On May 9, PKE introduced Aeroadhere™ FAE-350-1 Structural Film Adhesive, a 350°F curing epoxy film adhesive for aerospace structures. It is suitable for various bonding applications, including composite, metal, and honeycomb bonding.
Such technological advancements will increase the demand for their products and will drive revenue growth.
During the fiscal 2024 first quarter ended May 28, 2023, PKE’s sales were $15.55 million, up 21.7%year-over-year. Its gross profit increased 18.1% from the year-ago value to $4.83 million. The company’s adjusted EBITDA grew 18.1% from the prior-year quarter to $3.31 million.
Over the next five years, the company’s EPS is expected to grow 15% per annum. PKE’s stock gained 15.7% year-to-date and 26.9% over the past year to close the last trading session at $13.63.
PKE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PKE has a B for Quality and Momentum. Out of the 92 stocks in the Semiconductor & Wireless Chip industry, it is ranked #12.
To see the other ratings of PKE for Sentiment, Growth, Value, and Stability, click here.
Stock #2: ROHM Co., Ltd. (ROHCY)
ROHCY, headquartered in Kyoto, Japan, is a global electronic components manufacturer. The company operates in three segments: LSI; Semiconductor Devices; and Modules. Its product portfolio comprises ICs, discrete semiconductor products like MOSFETs, bipolar transistors and diodes, power devices such as power transistors and diodes, and modules.
Yesterday, ROHCY introduced the BM3G0xxMUV-LB series of power stage ICs featuring integrated 650V GaN HEMTs and gate drivers. These ICs leverage advanced power and analog technologies, offering a wide drive voltage range (2.5V to 30V) for compatibility with various controller ICs.
This innovation reduces component volume (approximately 99%) and power loss (about 55%), resulting in improved efficiency. The newly launched devices are ideal for primary power supplies inside industrial and consumer applications like data servers and AC adapters.
On August 24, ROHCY launched the BD5310xG-CZ / BD5410xG-CZ Hall IC series, which comprises 42V withstand voltage and a wide voltage range (2.7V to 38V), enabling support for a variety of applications.
Besides reducing power consumption by 20%, these devices allow direct connection to a 12V battery. They are available with various magnetic flux density options for different applications like position and rotation detection in vehicles. Such product launches are expected to drive ROHCY’s revenue stream and growth.
For the first quarter of fiscal year 2024, ROHCY reported net sales of ¥120.16 billion ($824.29 million), while its operating profit came in at ¥17.69 billion ($121.37 million). Also, profit attributable to owners of parent was ¥20.13 billion ($138.09 million).
In addition. as of March 31, 2023, the company’s total assets stood at ¥1.15 trillion ($7.89 billion), compared to ¥1.12 trillion ($7.68 billion) as of March 31, 2022.
Street expects ROHCY’s revenue for the fourth quarter (ending March 2024) to grow 11.6% year-over-year to $971.06 million. Similarly, the consensus revenue estimate of $3.62 billion for the fiscal year 2024 represents a 12.6% increase year-over-year.
ROHCY’s stock gained 8.5% over the past six months and 16% year-to-date to close the last trading session at $41.79.
ROHCY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
ROHCY has a B grade for Value and Stability. Out of the 92 stocks in the Semiconductor & Wireless Chip industry, it is ranked #9.
To see the other ratings of ROHCY for Sentiment, Growth, Quality, and Momentum, click here.
Stock #1: ChipMOS TECHNOLOGIES INC. (IMOS)
Headquartered in Hsinchu, Taiwan, IMOS develops, manufactures, and sells high-integration and high-precision ICs and related assembly and testing services internationally. The company operates through Testing; Assembly; Testing and Assembly for LCD, OLED, and Other Display Panel Driver Semiconductors; Bumping; and Others segments.
On July 27, IMOS distributed a cash dividend of $1.477 per ADS (or roughly US$1.147 per ADS after the Taiwan withholding tax and Citibank, N.A.’s depositary fees) on July 27, 2023.
IMOS pays a $1.48 dividend annually, which translates to a yield of 6.24% at the current price. Its four-year average dividend yield is 6.78%. Also, the company’s dividend payouts have increased at a CAGR of 6.4% over the past three years.
During the second quarter that ended June 30, 2023, IMOS’ revenue came in at NT$5.45 billion ($170.77 million). The company’s operating profit and profit for the period were NT$521.37 million ($16.36 million) and NT$628.53 million ($19.72 million).
Furthermore, the company’s cash and cash equivalents were NT$12.29 billion ($385.50 million) as of June 30, 2023, compared to NT$7.27 billion ($228.04 million) as of June 30, 2022. As of June 30, 2023, its total assets were NT$20.53 billion ($643.97 million), up 20.9% year-over-year.
Analysts expect IMOS’ revenue for the fourth quarter (ending December 2023) to increase 20.6% year-over-year to $185.71 million. Also, the company’s revenue for the fiscal year (ending December 2024) is expected to grow 16% year-over-year to $790.95. Moreover, the company topped the consensus revenue estimates in three of the trailing four quarters.
Shares of IMOS have increased 11% year-to-date and 2.8% over the past year to close the last trading session at $23.81.
IMOS’s solid 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.
IMOS has an A grade for Momentum and a B for Value and Sentiment. It is ranked #7 out of 92 stocks in the Semiconductor & Wireless Chip industry.
To see the other ratings of IMOS for Quality, Growth, and Stability, click here.
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ROHCY shares were trading at $42.21 per share on Friday morning, up $0.42 (+1.01%). Year-to-date, ROHCY has gained 18.10%, versus a 18.80% 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.
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