You can make money from autonomous vehicles without directly investing in automakers. Buying shares of semiconductor stocks involved in autonomous vehicle technology is an auxiliary play on the overarching worldwide shift to self-driven electric vehicles.
The gradual transition to autonomous vehicles is a matter of when rather than if. Even if you are not a fan of vehicles driving people rather than vice versa, there is clearly money to be made in this growing industry.
Tower Semiconductor (TSEM) and Microchip Technology Incorporated (MCHP) are two of the top semiconductor stocks that will generate revenue through the rise of autonomous vehicles. Let’s take a look at each of these stocks to determine if either or both are worthy of your investing dollars.
TSEM
TSEM makes semiconductor integrated circuits. This $2.2 billion business makes chips used for all sorts of applications. TSEM contributes to the electrical components that are the brains of automated vehicles. About 10% of TSEM sales stem from the automotive space. In particular, the company's components are used in LiDAR and image sensor technologies empower autonomous vehicles to view the spaces around them. Electric vehicles also use TSEM’s tech for power management. This means TSEM has several revenue generators within the autonomous vehicle space alone.
Add in the fact that TSEM has fab facilities in the United States and there is even more reason for investors to be bullish about the stock. The Biden administration has made it clear it would like to re-shore and ramp up the domestic production of semiconductors.
TSEM has a forward beta of 19.78. This is a reasonable ratio that indicates the stock is fairly valued at $28.65. Comforting prospective investors all the more is TSEM's beta of 1.36. This beta is a sign TSEM probably won't prove egregiously volatile.
TSEM has a B POWR Rating, meaning it is a Buy. TSEM has an A Sentiment component grade along with Bs in the Stability, Momentum and Value components. Click here to find out more about how TSEM fares in the rest of the POWR Rating components such as Quality and Growth.
Out of the 99 publicly traded companies in the Semiconductor & Wireless Chip space, TSEM is ranked 15th. You can find out more about this segment by clicking here.
The average analyst target price for TSEM is $36.68. If TSEM reaches this price target, it will have popped by more than 31%.
MCHP
MCHP makes components for embedded control systems that are actually computers with comparably less power capable of performing highly specific actions. Based in Chandler, AZ, MCHP raked in more than $5.4 billion of revenue last year. More than half of the company’s revenue stems from microcontrollers of the 32-bit, 16-bit and 8-bit varieties.
MCHP is one of the top players in the autonomous vehicle space. The company’s chips are used in devices for wireless connections and apps for power management. MCHP technology is used in EVs. To be more specific, the company’s diodes and MOSFETs are used in electric vehicles’ powertrains as well as their charging systems. The company’s connectivity chip empowers the artificial intelligence behind autonomous vehicles' centralized computing and navigation systems.
MCHP has a forward P/E ratio of 17.48. This is a moderate ratio that indicates the stock is not overvalued or undervalued at $148. MCHP has a 1.65 beta so there is no reason for investors to be worried about potential volatility.
MCHP has a B POWR Rating grade, meaning it qualifies as a Buy. The stock has B grades in the Momentum, Sentiment and Growth components of the POWR Ratings. Click here to find out how MCHP fares in the rest of the POWR Ratings components including Quality, Value and Stability.
A total of 99 stocks comprise the Semiconductor & Wireless Chip space. MCHP is ranked in the top third of the segment, slotting in at number 23. Investors can find out more about the stocks in this space by clicking here.
The average analyst price target for MCHP has increased $3.74 in the past 84 days. If the analysts are correct, MCHP will reach their average target price of $180.17. If MCHP hits this price target, it will have popped by more than 21%.
MCHP shares were trading at $158.09 per share on Friday morning, up $2.15 (+1.38%). Year-to-date, MCHP has gained 15.43%, versus a 21.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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