Since last year, the tech industry has been in the limelight, given accelerated demand for advanced tech productions and solutions amid remote working trends and rapid digital transformation. In this environment, companies are investing significantly in developing breakthrough technologies to stay ahead of the competition.
In 2023, $30 billion in revenue is expected to be generated by products and services that did not exist prior to the pandemic, according to Gartner. The research and advisory company also projects the worldwide IT spending will total $4.2 trillion in 2021, increasing 8.6% year-over-year. Furthermore, governments are investing substantially to overcome a current shortage in semiconductor production, which is expected to accelerate tech innovation in the long run.
Given this backdrop, we believe tech companies Lam Research Corporation (LRCX), KLA Corporation (KLAC), and STMicroelectronics N.V. (STM) are well-positioned to deliver significant returns in the upcoming months.
Lam Research Corporation (LRCX)
Lam Research Corporation designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used to fabricate integrated circuits worldwide. It operates in the manufacturing and servicing of wafer processing semiconductor manufacturing and equipment segment. LRCX is based in Fremont, Calif.
On August 4, LRCX announced the expansion of its global manufacturing capacity with the opening of its largest facility in Malaysia. The move should allow the company to address the growing demand for semiconductor technology while fortifying the resiliency of the company's manufacturing network.
LRCX’s revenues increased 48.5% year-over-year to $4.15 billion in its fiscal second quarter, ended June 27. Its operating income grew 74.1% from its year-ago value to $1.32 billion, while its net income improved 64.3% year-over-year to $1.14 billion. The company’s EPS increased 68.7% year-over-year to $7.98.
A 4.07 billion consensus revenue estimate $ for its fiscal third quarter (ending September 2021) indicates a 30.9% increase year-over-year. The Street expects the company’s EPS to rise 37% from the prior-year quarter to $7.77 in the current quarter. LRCX has an impressive earnings surprise history also; it beat the consensus EPS estimates in each of the trailing four quarters.
LRCX gained 71.5% over the past year to close yesterday’s trading session at $647.96. The stock has gained 37.2% year-to-date.
LRCX has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
LRCX also has a grade of B for Momentum and Quality. In addition, it is ranked #38 among the 99 stocks in the B-rated Semiconductor & Wireless Chip industry.
Click here to view additional LRCX ratings for Growth, Value, Sentiment, and Stability.
Click here to checkout our Semiconductor Industry Report for 2021
KLA Corporation (KLAC)
KLAC designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nanoelectronics industries worldwide. KLAC is headquartered in Milpitas, Calif.
On June 22, KLAC launched four new, improved products for automotive chip manufacturing. Amid the growing automotive electronics ecosystem, which is driving the demand for semiconductor chips, this launch should allow the company to remain a leading player in the industry.
KLAC’s total revenues increased 31.9% year-over-year to $1.93 billion in its fiscal fourth quarter, ended June 30. Its net income improved 53.9% year-over-year to $632.98 million. The company’s EPS increased 55.9% year-over-year to $4.10. Its cash and cash equivalents balance rose 16.2% from the prior-year quarter to $1.43 billion over this period.
Analysts expect KLAC’s revenues to increase 29.2% year-over-year to $1.92 billion in the current quarter, ending September 30, 2021. The $4.13 consensus EPS estimate for the current quarter indicates a 36.3% rise from the same period last year. In addition, KLAC surpassed the Street’s EPS estimates in each of the trailing four quarters, which is impressive. Shares of KLAC have gained 73.6% over the past year and 36.5% year-to-date.
It is no surprise that KLAC has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The stock also has an A grade for Quality, and a B for Sentiment and Momentum. KLAC is ranked #19 in the Semiconductor & Wireless Chip industry.
To see additional KLAC ratings for Growth, Value, and Stability, click here.
Click here to checkout our Semiconductor Industry Report for 2021
STMicroelectronics N.V. (STM)
STM designs, develops, manufactures, and markets semiconductor products in Europe, the Middle East, Africa, the Americas, and the Asia Pacific. The Geneva, Switzerland-based company operates through its Automotive and Discrete Group; Analog, MEMS and Sensors Group; and Microcontrollers and Digital ICs Group segments.
On July 27, STM announced that it had manufactured the first 200mm (8-inch) Silicon-Carbide (SiC) bulk wafers for prototyping next-generation power devices. This innovation should allow STM to serve its automotive and industrial customers better and position the company for continued growth.
On July 21, STM, together with Unilumin, a leader in LED displays based in China, announced the development of a new Unilumin display using the ST60A2, ST’s 60GHz RF transceiver for advanced high-data-rate contactless-transfer solutions. This is expected to be widely used in new LED-based display products that will be launched throughout 2021 and contribute significantly to the company’s revenues.
STM’s net revenue increased 43.4% year-over-year to $2.99 billion in its fiscal second quarter, ended July 3. Its operating income stood at $489 million, up 358.8% from the same period last year. Its net income grew 357.2% from its year-ago value to $412 million. The company’s EPS increased 340% year-over-year to $0.44.
A $3.08 billion consensus revenue estimate for the fiscal third quarter ending September 2021 indicates a 15.5% improvement from the same period last year. Analysts expect the company’s EPS to come in at $0.46 in the current quarter, indicating a 76.9% rise year-over-year. Furthermore, STM surpassed the Street’s EPS estimates in three of the trailing four quarters.
STM has gained 13.4% year-to-date. Over the past year, the stock gained 45.6% to close yesterday’s trading session at $42.10.
STM has an overall A rating, which equates to Strong Buy in our proprietary rating system. STM has an A grade for Sentiment, and a B for Growth, Value, Momentum, and Quality. It is ranked #3 in the Semiconductor & Wireless Chip industry.
Beyond what we’ve stated above, we have also rated STM for Stability. Click here to view all STM ratings.
Click here to checkout our Semiconductor Industry Report for 2021
LRCX shares were trading at $644.25 per share on Monday afternoon, down $3.71 (-0.57%). Year-to-date, LRCX has gained 37.02%, versus a 19.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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