The U.S. semiconductor industry is expected to grow substantially in 2022, thanks to sustained demand, growing digital transformation, and government incentives and investments. The bullish market sentiment surrounding this industry has driven rallies in the stocks of Lattice (LSCC), Power Integrations (POWI), and Rambus (RMBS) over the past month, despite broader market weakness. So, let’s discuss these names.

The semiconductor industry has been the recipient of enormous investments from the public and private sectors in response to the global chip shortage. Due to the increasing applications of semiconductors in automobiles, industries, data centers, and electronic gadgets, the industry has been in the limelight since last year. And the global semiconductor industry is expected to grow 10% year-over-year to $600 billion this year.

The U.S. government has been supporting the growth of the domestic semiconductor industry through investments and incentives. The House of Representatives has passed the CHIPs Act, which includes $52 billion in investments to incentivize domestic semiconductor manufacturing, design, and research. The bill is now awaiting passage in the U.S. Senate.

Mid-cap semiconductor stocks Lattice Semiconductor Corporation (LSCC), Power Integrations, Inc. (POWI), and Rambus Inc. (RMBS) have gained in price over the past month, while benchmark indexes declined over this period. Thus, we think these surging semiconductor stocks could be worth watching.

Click here to checkout our Semiconductor Industry Report for 2022

Lattice Semiconductor Corporation (LSCC)

Hillsboro, Ore.-based LSCC develops, markets, and sells semiconductor products in the Americas, Asia, and Europe. The company provides programmable power solutions and generates revenue from differentiated logic semiconductor products, design services, and licenses. LSCC consists of four product families: Certus-NX and ECP, MachXO, iCE40, and CrossLink. It has a market capitalization of $8.65 billion.

In January, LSCC collaborated with Lenovo Group Limited (LNVGY) to power Lenovo’s ThinkPad X1 portfolio. The ThinkPad portfolio leverages a fully integrated LSCC client hardware and software solution to deliver advanced user experiences. This collaboration might boost the company’s revenue streams.

In its fiscal fourth quarter, ended Jan. 1, 2022, LSCC's revenue increased 32.3% year-over-year to $141.80 million. Its operating income grew 63.6% year-over-year to $46.61 million, and its net income grew 64.7% year-over-year to $45.35 million. The company's net income per share increased 68.4% from its  year-ago value to $0.32.

The $146.23 million consensus revenue estimate for its fiscal year 2022 first quarter, ending March 31, 2022, represents 26.4% year-over-year growth. The $0.22  consensus EPS estimate for the current quarter represents 71.2% year-over-year growth. Also, LSCC has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 9.2% in price over the past month and 26.5% over the past year. LSCC closed yesterday’s trading session at $62.84.

Power Integrations, Inc. (POWI)

POWI designs, develops, manufactures, markets, and sells analog and mixed-signal integration (ICs) and other electronic components worldwide. The San Jose, Calif., company offers a range of AC to DC power conversion products, high-voltage gate-driver products, high-voltage diodes, and motor-driver ICs. POWI serves communications, computer, consumer, and industrial markets. The company has a $5.33 billion market capitalization.

On Feb. 15, 2022, POWI introduced two new AEC-Q100 qualified, 1700-volt rated ICs to its InnoSwitch 3-AQ family. These devices incorporate a silicon carbide (SiC) switching MOSFET that delivers up to 70 watts of output power and is targeted for use in 600 and 800-volt battery and fuel-cell electric vehicles (EVs). This launch is expected to increase POWI’s customer reach and boost revenues.

POWI's net revenues increased 14.6% year-over-year to $172.65 million in its fiscal 2021 fourth quarter, ended Dec. 31, 2021. POWI gross profit grew 24.7 % year-over-year to $94.15 million. The company's income from operations rose 47.1% year-over-year to $55.32 million, and its net income increased 39.8% year-over-year to $50.92 million. Its net income per share improved 38.3% year-over-year to $0.83.

Analysts expect POWI’s revenue for its fiscal 2022 first quarter, ending March 31, 2022, to be $180.14 million, representing a 3.7% rise year-over-year. The Street expects the company’s EPS to come in at $0.87, representing a 14.7% increase year-over-year. POWI also has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the four trailing quarters.

Shares of POWI have increased 11.1% in price over the past month and 3.1% over the past year. They closed yesterday's trading session at $90.06.

Rambus Inc. (RMBS)

RMBS offers semiconductor products in the U.S., Canada, Europe, Singapore, Asia, South Korea, Japan, Taiwan, and internationally. The company provides DDR memory interface chips, physical interface, digital controller IPs, a portfolio of patents, high-speed serial links, security products, and technology licenses. RMBS has a market capitalization of $3.06 billion. The company is headquartered in Sunnyvale, Calif.

This January, RMBS delivered a PCI express 6.0 controller for next-generation data centers. This PCI controller offers an integrated solution that delivers performance and security for advanced SoCs and FPGAs. This is expected to boost RMBS’s growth and profitability.

In its fiscal year 2021 fourth quarter, ended Dec.  31, 2021, RMBS’ total revenue increased 48.2% year-over-year to $91.78 million. RMBS’ gross profit rose 52.8% year-over-year to $74.04 million. Its income before income taxes grew 175.2% year-over-year to come at $7.86 million, and the company’s net income increased 150.6% from its year-ago value to $6.11 million. Its net income per share rose 145.5% from the year-ago value to $0.05.

The $127.90 million consensus revenue estimate for its fiscal year 2022 first quarter, ending March 32, 2022, represents 21.8% year-over-year growth.

The stock has gained 8.9% in price over the past month and 35.1% over the past year. RMBS closed yesterday’s trading session at $28.01.

Click here to checkout our Semiconductor Industry Report for 2022

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LSCC shares were trading at $61.24 per share on Thursday morning, down $1.60 (-2.55%). Year-to-date, LSCC has declined -20.53%, versus a -8.46% rise in the benchmark S&P 500 index during the same period.

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About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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