The semiconductor industry witnesses high demand thanks to rapid technological advancements and the growing need for electronic devices. However, market volatility has dampened investors’ sentiments amid concerns of an impending recession due to high-interest rates and persistent inflation.
In times like these, stocks witnessing solid momentum could be strategic investments. Investors could look to consider fundamentally strong stocks Infineon Technologies AG (IFNNY), STMicroelectronics N.V. (STM), and Sumco Corporation (SUOPY). While these stocks have shown strong momentum lately, which is anticipated to sustain, investors could be wise to jump on the bandwagon.
Despite facing macroeconomic headwinds over the past year, the semiconductor sector is well poised for growth in the long term. The semiconductor market is projected to grow at a CAGR of 12.2% to $1.38 trillion by 2029. Additionally, investors’ interest in semiconductor stocks is evident from the VanEck Vectors Semiconductor ETF’s (SMH) 31.1% returns over the past six months.
Amid this backdrop, investors could consider the featured stocks. Let’s take a closer look at their fundamentals.
Infineon Technologies AG (IFNNY)
Headquartered in Neubiberg, Germany, IFNNY designs, develops, manufactures, and markets semiconductors and related system solutions worldwide. It operates through four segments: Automotive; Industrial Power Control; Power & Sensor Systems; and Connected Secure Systems.
On March 2, 2023, IFNNY and GaN Systems Inc. announced that the companies had signed a definitive agreement under which IFNNY would acquire GaN Systems for US$830 million.
IFNNY’s CEO, Jochen Hanebeck, stated, “The planned acquisition of GaN Systems will significantly accelerate our GaN roadmap, based on unmatched R&D resources, application understanding, and customer project pipeline. Following our strategy, the combination will further strengthen Infineon’s leadership in Power Systems through mastery of all relevant power technologies, be it on silicon, silicon carbide, or gallium nitride.”
In terms of the forward non-GAAP P/E, IFNNY’s 14.60x is 35.2% lower than the 22.54x industry average. Likewise, its 8.66x forward EV/EBITDA is 40.6% lower than the industry average of 14.58x. Furthermore, the stock’s 13.28x forward EV/EBIT is 27.7% lower than the industry average of 18.36x.
IFNNY’s revenue for the fiscal second quarter ended March 31, 2023, increased 24.9% year-over-year to €4.12 billion ($4.43 billion). The company’s adjusted profit for the period from continuing operations attributable to shareholders of IFNNY increased 56.5% year-over-year to €900 million ($967.97 billion). In addition, its adjusted EPS came in at €0.69, representing a 56.8% increase over the prior-year quarter.
IFNNY’s EPS for the quarter ending September 30, 2023, is expected to increase 16.8% year-over-year to $0.69. Its revenue for the quarter ending June 30, 2023, is expected to increase 17.3% year-over-year to $4.32 billion. Over the past nine months, the stock has gained 55.9% to close the last trading session at $40.84.
IFNNY’s stock is trading above its 50-day and 200-day moving averages of $38.04 and $32.83, respectively.
IFNNY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #3 out of 91 stocks in the Semiconductor & Wireless Chip industry. In addition, it has an A grade for Momentum and a B for Growth, Value, Stability, and Sentiment.
Click here to see the additional rating of IFNNY for Quality.
STMicroelectronics N.V. (STM)
STM designs, develops, manufactures, and sells semiconductor products in Europe, the Middle East, Africa, the Americas, and the Asia Pacific. The company operates through the Automotive and Discrete Group; Analog, MEMS, and Sensors Group; and Microcontrollers and Digital ICs Group segments.
In terms of forward non-GAAP P/E, STM’s 11.64x is 48.3% lower than the 22.54x industry average. Its 2.48x forward EV/Sales is 15.8% lower than the industry average of 2.94x. Likewise, its 7.05x forward EV/EBITDA is 51.7% lower than the 14.58x industry average.
STM’s net revenues for the first quarter that ended April 1, 2023, increased 19.8% year-year-over-year to $4.25 billion. Its net income attributable to parent company stockholders increased 39.8% year-over-year to $1.04 billion. Additionally, it’s EPS attributable to parent company increased 39.2% year-over-year to $1.10.
STM’s EPS and revenue for the quarter ending June 30, 2023, are expected to increase 16.9% and 11.6% year-over-year to $1.08 and $4.28 billion, respectively. It has a commendable earnings surprise history, surpassing its consensus EPS estimates in each of the trailing four quarters. The stock has gained 37.9% year-to-date to close the last trading session at $49.05.
STM’s stock is trading above its 50-day and 200-day moving averages of $45.93 and $41.32, respectively.
STM’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #4 in the same industry. It has an A grade for Momentum and a B for Value, Sentiment, and Quality.
In total, we rate STM on eight different levels. Beyond what we stated above, we have also given STM grades for Growth and Stability. Click here to access all the ratings.
Sumco Corporation (SUOPY)
Headquartered in Tokyo, Japan, SUOPY manufactures and sells silicon wafers for the semiconductor industry worldwide. It provides monocrystalline ingots, as well as polished, annealed, epitaxial, junction isolated, silicon-on-insulator, and reclaimed polished wafers.
In terms of forward EV/Sales, SUOPY’s 1.55x is 47.2% lower than the 2.94x industry average. Its 4.56x forward EV/EBITDA is 68.7% lower than the industry average of 14.58x. Likewise, its 1.60x forward Price/Sales is 42.5% lower than the 2.78x industry average.
For the fiscal first quarter that ended March 31, 2023, SUOPY’s net sales increased 9.5% year-over-year to ¥109.95 billion ($78.82 million). The company’s operating income increased 10.8% year-over-year to ¥25.97 billion ($18.62 million). Its net income attributable to owners of the parent increased 148% year-over-year to ¥37.70 billion ($27.03 million).
Analysts expect SUOPY’s revenue for fiscal 2023 to increase 13% year-over-year to $3.15 billion. The stock has gained 9.4% year-over-year to close the last trading session at $28.70.
SUOPY’s stock is trading above its 50-day and 200-day moving averages of $28.43 and $26.57, respectively.
SUOPY’s strong outlook reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #2 in the Semiconductor & Wireless Chip industry. It has an A grade for Momentum and Stability and a B for Growth and Value.
We have also given SUOPY grades for Sentiment and Quality. Get all SUOPY ratings here.
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IFNNY shares were trading at $41.28 per share on Tuesday morning, up $0.44 (+1.07%). Year-to-date, IFNNY has gained 37.73%, versus a 14.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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