Early Investors Eagerly Watching These 3 Semiconductor Stocks in October

With semiconductors being essential components in an extensive range of electronic devices, their solid demand spans across industries such as automotive, healthcare, and consumer electronics. Moreover, the sector is riding a wave of ongoing technological progress, enabling the creation of more robust and energy-efficient chips.

So, I present quality semiconductor stocks Tower Semiconductor Ltd. (TSEM), inTEST Corporation (INTT), and Amkor Technology, Inc. (AMKR) with discounted valuation multiples that have captured the attention of early investors this month.

Semiconductors are essential components found in a wide range of electronic devices, enabling critical functions such as data processing and storage. The extensive usage of chips across industries like automotive and healthcare is boosting the semiconductor industry.

In addition, ongoing technological progress, including developments in nanotechnology, new materials, and manufacturing processes, is enabling the creation of more robust and energy-efficient chips to meet evolving industry demands.

According to a report by Custom Market Insights, the global semiconductor chip market is expected to grow at a CAGR of 7.1% to reach $1.12 trillion by 2032.

Moreover, the increasing adoption of AI and IoT technologies creates opportunities for chips optimized for edge computing, real-time analytics, and data processing. Customized chips tailored to AI and IoT applications exhibit high growth potential.

Furthermore, the continual growth of the smartphone market generates opportunities for advanced chips optimized for mobile computing and 5G connectivity. As smartphones evolve, there is an increasing demand for more efficient and high-performance chips to enhance user experiences.

The global AI chip market is expected to reach $383.70 billion by 2032, expanding at a CAGR of 38.2%.

Considering these conducive trends, let's take a look at the fundamentals of the three best Semiconductor & Wireless Chip stocks, starting with number 3.

Stock #3: Tower Semiconductor Ltd. (TSEM)

Headquartered in Migdal Haemek, Israel, TSEM is an independent semiconductor foundry that manufactures and markets analog-intensive mixed-signal semiconductor devices in the United States, Japan, other Asia countries, and Europe.

TSEM’s forward non-GAAP P/E multiple of 11.85 is 46.1% lower than the industry average of 21.99. Its forward EV/Sales multiple of 1.40 is 46.2% lower than the industry average of 2.61.

On September 7, 2023, TSEM and InnoLight Technology, a data center optics company, announced their collaboration to develop multi-generation high-speed optical transceivers based on TSEM’s Silicon Photonics process platform (PH18).

With production already underway, this strategic partnership is expected to enable cutting-edge solutions to support the growing demands of AI, datacenters, and next-generation telecom networks.

Moreover, on September 5, TSEM and Intel Foundry Services entered into an agreement where Intel will offer foundry services and manufacturing capacity to support TSEM's global customer base for $300 million.

This collaboration underscores the commitment of both companies to expand their foundry capabilities, with Intel manufacturing TSEM's specialized semiconductor flows, including 65-nanometer power management BCD flows, at its Fab 11X facility in Rio Rancho, New Mexico.

During the first half year that ended June 30, 2023, TSEM’s operating profit increased 4.6% year-over-year to $139.94 million. The company’s net income increased 9.3% year-over-year to $122.59 million, and EPS rose 8.9% year-over-year to $1.10.

Street expects TSEM’s revenue and EPS to amount to $359.18 million and $0.49 in the fiscal third quarter ending September 2023. The company has surpassed consensus revenue estimates in three of the trailing four quarters, which is remarkable.

The stock declined marginally intraday to close the last trading session at $24.42.

TSEM’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

It also has an A grade for Momentum and a B for Value. TSEM is ranked #19 in the 90-stock Semiconductor & Wireless Chip industry.

To see TSEM’s additional ratings for Growth, Stability, Sentiment, and Quality, click here.

Stock #2: inTEST Corporation (INTT)

INTT supplies test and process solutions to various industries worldwide, including automotive, defense/aerospace, industrial, life sciences, security, and semiconductors. The company operates through three segments: Electronic Test; Environmental Technologies; and Process Technologies.

In terms of forward non-GAAP P/E, INNT’s 14.38x is 34.6% lower than the industry average of 21.99x. Its forward EV/Sales multiple of 1.25 is 52.2% lower than the industry average of 2.61.

In the fiscal second quarter that ended June 30, 2023, INTT’s revenue increased 10.1% year-over-year to $32.56 million. Its gross profit increased 10.9% year-over-year to $15.03 million and operating income rose 22.6% from the year-ago quarter to $3.34 million. The company’s adjusted EBITDA grew 14.4% year-over-year to $4.80 million.

Analysts expect INTT’s revenue to increase 6.1% year-over-year in the current quarter (ending September 2023) to $32.65 million.  Its EPS is estimated to be 0.26 in the current quarter. The company has an incredible surprise history, surpassing the consensus EPS and revenue estimates in each of the trailing four quarters.

The stock has gained 94.9% over the past year and 44.4% year-to-date to close the last trading session at $14.87.

INTT’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It has an A grade for Momentum and a B for Value. It is ranked #17 in the same industry.

Click here to see INTT’s other ratings (Growth, Stability, Sentiment, and Quality).

Stock #1: Amkor Technology, Inc. (AMKR)

AMKR provides outsourced semiconductor packaging and test services in the U.S., Japan, Europe, the Middle East, Africa, and the Asia Pacific.

AMKR’s forward non-GAAP P/E multiple of 14.92 is 32.2% lower than the industry average of 21.99. Its forward EV/Sales multiple of 0.87 is 66.6% lower than the industry average of 2.61.

On September 7, AMKR disclosed the pricing details of a secondary underwritten public offering. The offering involves 10,000,000 shares of the company's common stock, priced at $24 per share, being sold by 915 Investments, LP, which is an investment vehicle associated with the family of James J. Kim, the founder and Executive Chairman of AMKR, and Susan Y. Kim, the Executive Vice Chairman of the Board.

On September 25, AMKR paid a cash dividend of $0.075 per share on the company’s common stock. The company pays an annual dividend of $0.30, which translates to a dividend yield of 1.33% on the current market price, higher than its four-year average dividend yield of 0.54%.

AMKR reported net sales of $1.46 billion in the fiscal second quarter that ended June 30. Its gross profit amounted to $186.87 million. In addition, net income attributable to AMKR came in at $64.44 million and $0.26 per share, respectively.

AMKR is expected to report EPS of $0.50 and revenue of $1.79 billion for the fiscal third quarter ending in September 2023. It has topped the consensus EPS and revenue estimates in three of the trailing four quarters.

Shares of AMKR have gained 32.4% over the past year, closing its last trading session at $22.58.

AMKR’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to a Buy in our proprietary rating system.

AMKR has an A grade for Sentiment, Momentum, and Value. It is ranked #15 in the Semiconductor & Wireless Chip industry.

In addition to the POWR Ratings highlighted above, one can access AMKR’s additional ratings for Growth, Stability, and Quality here.

What To Do Next?

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AMKR shares were trading at $22.21 per share on Tuesday morning, down $0.37 (-1.64%). Year-to-date, AMKR has declined -6.59%, versus a 11.37% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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