Semiconductors have been at the forefront of the tech revolution, powering various technologies that have revolutionized how individuals live, and businesses operate. The burgeoning demand for semiconductor components attributed to the rollout of 5G networks and the continuous development of next-generation wireless technologies is driving growth in the semiconductor market.
Given the industry’s steady growth prospects, investors could consider quality semiconductor stocks Photronics, Inc. (PLAB), Cirrus Logic, Inc. (CRUS), and ROHM Co., Ltd. (ROHCY) for year-end gains.
The extensive usage of semiconductors in a wide range of end-use applications such as electronics, industrial equipment, automotive, networking and communications, and data processing is expected to boost the growth of the global semiconductors market.
The global semiconductor market is expected to grow at a CAGR of 12.3% until 2032.
Furthermore, as chip demand rises, governments have been ramping up investments to lure semiconductor production and innovation to their shores. The White House marked the one-year anniversary of signing “Chips for America” legislation in August, providing $52.70 billion in subsidies for semiconductor manufacturing, research, and workforce development across the United States.
The Wireless chipset market is estimated to grow at a CAGR of 4.4% until 2027. The integration of AI in chipsets opens up new opportunities and applications across different industries fuelling the demand for advanced wireless chipsets.
With these favorable trends in mind, let’s delve into the fundamentals of the three best Semiconductor & Wireless Chip stocks, beginning with the third choice.
Stock #3: Photronics, Inc. (PLAB)
PLAB engages in the manufacture and sale of photomask products and services in the United States, Taiwan, China, Korea, Europe, and internationally.
PLAB’s trailing-12-month EBIT margin of 28.44% is 495.9% higher than the industry average of 4.77%. Its trailing-12-month EBITDA margin of 37.43% is 304.7% higher than the industry average of 9.25%.
PLAB’s revenues for the third quarter ended July 30, 2023, rose 2% year-over-year to $224.21 million. Its gross profit rose 3.5% year-over-year to $86.80 million. Its operating income increased 14.1% year-over-year to $1.15 billion. The company’s net income came in at $48.26 million. In addition, its EPS came in at $0.44.
Analysts expect PLAB’s revenue for the fiscal four quarter (ended October 2023) to increase 6.5% year-over-year to $224 million. Its EPS is expected to be $0.53 for the same quarter. In addition, the company exceeded the consensus revenue estimates in three of the trailing four quarters, which is remarkable.
PLAB’s shares have gained 13.2% over the past year to close the last trading session at $20.88.
PLAB’s POWR Ratings reflect its 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, with each factor weighted to an optimal degree.
It has an A grade for Momentum and a B in Value and Quality. It is ranked #6 out of 91 stocks in the Semiconductor & Wireless Chip industry.
Beyond what is stated above, we’ve also rated PLAB for Stability, Growth, and Sentiment. Get all PLAB ratings here.
Stock #2: Cirrus Logic, Inc. (CRUS)
CRUS is a fabless semiconductor company that develops low-power, high-precision mixed-signal processing solutions in China, the United States, and internationally.
CRUS’s trailing-12-month EBIT margin of 17.08% is 257.8% higher than the 4.77% industry average. Its trailing-12-month ROCE of 8.37% is 654.3% higher than the 1.11% industry average.
For the fiscal second quarter that ended September 30, 2023, CRUS’s net sales came in at $481.06 million. The company’s net income amounted to $75.41 million. Its gross profit came in at $246.60 million. It’s EPS came in at $1.34.
Street expects CRUS’s revenue to be $540.07 million for the fiscal third quarter ending December 2023. Its EPS for the same quarter is expected to be $2.01. In addition, the company exceeded the consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of CRUS have gained 9% over the past month to close the last trading session at $78.53.
It’s no surprise that CRUS has an overall rating of B, which equates to Buy in our proprietary rating system.
CRUS has a B grade for Momentum, Sentiment, and Value. It is ranked #18 in the same industry.
In addition to the POWR Ratings highlighted above, one can access CRUS’s ratings for Stability, Growth, and Quality here.
Stock #1: ROHM Co., Ltd. (ROHCY)
ROHCY, headquartered in Kyoto, Japan, manufactures and sells electronic components worldwide. The company operates through three segments: LSI; Semiconductor Devices; and Modules.
On November 29, 2023, ROHCY announced the RLD90QZW8 high-power laser diode, ideal for industrial equipment and consumer applications requiring distance measurement and spatial recognition.
On November 15, 2023, ROHCY announced a significant step towards enhancing customer experience by launching a new e-commerce platform that allows customers to easily purchase products directly on ROHCY’s website.
ROHCY’s trailing-12-month EBIT margin of 14.72% is 208.5% higher than the industry average of 4.77%. Its trailing-12-month ROCE of 7.02% is 532.6% higher than the industry average of 1.11%.
For the six-month period ended September 30, 2023, ROHCY’s net sales came in at ¥239.32 billion ($1.60 billion). Its operating profit came in at ¥29.83 billion ($199.56 million). The company’s profit attributable to owners of parent came in at ¥37.31 billion ($249.55 million).
For the fiscal year ending March 2024, revenue is projected to reach $3.45 billion, showing 7.2% year-over-year growth.
Over the past month, the stock has gained 19.1% to close the last trading session at $19.73.
ROHCY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has a B grade for Value, Momentum, and Stability. It is ranked #16 in the same industry.
Click here to access the additional ROHCY ratings (Growth, Sentiment, and Quality).
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
ROHCY shares were trading at $19.73 per share on Monday morning, down $0.12 (-0.60%). Year-to-date, ROHCY has gained 10.76%, versus a 21.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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