Pandemic-led supply chain issues have been a major disruption to the semiconductor industry. However, given the strong demand for semiconductors across industries, the sector demonstrated solid growth last year, and that momentum is expected to continue. Given this backdrop, we think the dip in the price of semiconductor stocks MACOM (MTSI), Infineon Technologies (IFNNY), SMART (SGH), Advantest (ATEYY), and MaxLinear (MXL) could be the ideal opportunity to buy these names. Let’s discuss.

Supply chain blockages have been a major headwind to the semiconductor industry since COVID-19 pandemic. However, strong demand for consumer electronics and increased prices due to tight supply have helped chipmakers perform well, despite the challenges. The worldwide semiconductor market was valued at $556 billion in 2021, up 26.2% from the previous year, with the Analog category the largest growth contributor with 33.1%. And according to World Semiconductor Trade Statistics (WSTS), the market is expected to grow 10.4% to $613.50 billion this year.

Earlier this month, U.S. House and Senate lawmakers said they had chosen negotiators to hammer out a deal on a bill to provide $52 billion in funding for semiconductor manufacturing. If the funding, also known as the Creating Helpful Incentives to Produce Semiconductors or CHIPS, is passed, it could significantly boost the semiconductor industry.

Given the industry’s promising prospects, we believe the hard-hit semiconductor stocks MACOM Technology Solutions Holdings, Inc. (MTSI), Infineon Technologies AG (IFNNY), SMART Global Holdings, Inc. (SGH), Advantest Corporation (ATEYY), and MaxLinear, Inc. (MXL) could represent an attractive buying opportunity now.

Click here to checkout our Semiconductor Industry Report for 2022

MACOM Technology Solutions Holdings, Inc. (MTSI)

Lowell, Mass.-based MTSI, along with its subsidiaries, designs and manufactures analog semiconductor solutions for use in wireless and wireline applications across the radio frequency (RF), microwave, millimeter-wave, and lightwave spectrum in the United States and internationally.

On March 8, 2022, MTSI announced the launch of its 128 GBaud Transimpedance Amplifiers (TIAs) and Modulator Drivers for coherent networking applications. These new products support long-haul, metropolitan, and Data Center Interconnect (DCI) optical module applications. The product should be a significant addition to MTSI’s portfolio and a new revenue stream for the company.

MTSI announced a collaboration with Broadcom Inc. (AVGO) to enable interoperability of its VCSEL driver and transimpedance amplifier (TIA) with Broadcom’s VCSEL laser, photodetector, and PAM-4 DSP for the company’s 100Gbps per lane multi-mode fiber (MMF) applications. The collaboration builds on MTSI’s single-mode interoperability offering and provides shorter design cycles for high-speed optical module manufacturers. This move is expected to be strategically beneficial for the company.

MTSI’s revenue increased 7.5% year-over-year to $159.62 million in its fiscal first quarter, ended Dec. 31, 2021. Its income from operations grew 124.2% from its year-ago value to $27.07 million, while its net income improved 1,648% year-over-year to $138.83 million. Its net income per share increased 1,600% from its year-ago value to $1.95.

The $0.66 consensus EPS estimate for its fiscal quarter ended March 31, 2022, represents a 29.7% improvement year-over-year. The $163.14 million  consensus revenue estimate for the same quarter represents an 8.3% increase from the same period last year. It has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.

The stock has slumped 31.9% in price year-to-date to close the last trading session at $53.33.

MTSI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

MTSI also has a B grade in Growth and Quality. It is ranked #14 of 96 stocks in the A-rated Semiconductor & Wireless Chip industry.

Beyond what is stated above, we have also rated MTSI for Momentum, Stability, Sentiment, and Value. Get all the MTSI ratings here.

Infineon Technologies AG (IFNNY)

IFNNY is a Munich, Germany-based designer, developer, and manufacturer of semiconductors and related system solutions. The company operates through four segments: Automotive; Industrial Power Control; Power Management & Multimarket; and Chip Card & Security.

On April 19, Winbond Electronics Corporation, a leading global supplier of semiconductor memory solutions, and IFNNY announced the expansion of their collaboration with the launch of the new HYPERRAM™ 3.0., which has a higher bandwidth, low power consumption, and easy control, enabling it to improve the performance of IoT end devices significantly. The company is expected to continue benefiting from this collaboration amid the fast-growing IoT market.

IFNNY also announced the expansion of its existing backend manufacturing operations in Indonesia, which will double IFFNY’s production area in Batam. IFNNY expects this expansion program to bolster its structural growth and strengthen its  supply chain while expanding its global network.

IFFNY’s revenue increased 20.1% from the prior-year quarter to €3.16 billion ($3.42 billion) in its fiscal first quarter, ended Dec. 31, 2021. Its gross profit for the quarter came in at €1.31 billion ($1.42 billion), reflecting a 33.2% increase year-over-year, while its operating profit stood at €617 million ($668.37 million) up 85.8% year-over-year. Its EPS increased 84.2% from the prior-year quarter to €0.35.

The Street expects IFNNY’s EPS for the fiscal year ending Sept.30, 2022 to improve 32.3% year-over-year to $1.83. The $14.21 billion consensus revenue estimate for the same period represents an 11.9% increase year-over-year.

IFNNY’s shares have slumped 33.3% in price year-to-date to close the last trading session at $30.67.

IFNNY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.

The company also has a B grade in Growth, Value, and Stability. The stock is ranked #16 in the Semiconductor & Wireless Chip industry. To get IFNNY’s ratings for Momentum, Quality, and Sentiment, click here.

SMART Global Holdings, Inc. (SGH)

SGH in the Cayman Islands designs and manufactures specialty solutions for the computing, memory, and light-emitting diode (LED) markets through its three lines of businesses–Memory Solutions; Intelligent Platform Solutions (IPS); and LED Solutions.

This week, SMART Modular Technologies, Inc., a division of SGH, announced its new SMART Kestral PCIe Optane Memory Add-in-Card (AIC), enabling memory acceleration and expansion up to 2TB. With this, the company expects to address the industry’s continually emerging memory add-on needs.

SGH’s net sales increased 47.8% year-over-year to $449.20 million in its fiscal second quarter, ended Feb. 28, 2022. Its non-GAAP operating income grew 111% from its year-ago value to $57.40 million, while its non-GAAP net income attributable to SGH improved 117.4% year-over-year to $47.60 million. Its non-GAAP EPS increased 97.7% from its year-ago value to $0.87.

Analysts expect SGH’s revenue for its fiscal third-quarter ending May 31, 2022, to come in at $455.02 million, indicating a 4% increase year-over-year. Its EPS is expected to grow 8.5% year-over-year to $0.75 in the same period. The company also surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past nine months, the stock has gained 4.3% in price to close yesterday’s trading session at $24.46. However, the stock has slumped 31.1% year-to-date.

SGH has a B grade in Growth, Value, and Sentiment. It is ranked #42 in the Semiconductor & Wireless Chip industry.

In addition to the POWR Rating grades I have just highlighted, you can see the SGH’s Momentum, Stability, and Quality ratings here.

Advantest Corporation (ATEYY)

Headquartered in Tokyo, Japan, ATEYY manufactures and sells semiconductor and component test system products and mechatronics-related products. It operates through three segments: Semiconductor and Component Test System; Mechatronics System; and Services, Support, and Others.

For its fiscal third quarter, ended Dec. 31, 2021, ATEYY’s net sales increased 43.6% year-over-year to ¥112.08 billion ($0.87 billion). Its gross profit grew 61.4% from its year-ago value to ¥64.85 billion ($0.51 billion). Its net income for the quarter stood at ¥25.65 billion ($0.20 billion), reflecting a 113.2% increase year-over-year. Furthermore, the EPS was ¥131.91, up 116.4% from the previous year's quarter.

Analysts expect ATEYY’s revenue for its fiscal quarter ended March 31, 2022, to come in at $916.45 million, indicating a 10% increase year-over-year. Also, the company’s revenue is expected to grow 29.3% year-over-year to $3.23 billion in the current fiscal year. ATEYY also beat the consensus EPS estimates in three of the trailing four quarters.

ATEYY’s stock has slumped 31.3% in price year-to-date and 24.4% over the past three months to close the last trading session at $65.86.

The company has an overall B rating, which translates to Buy in our proprietary ratings system.

ATEYY is also rated B in Stability and Quality. Within the Semiconductor & Wireless Chip industry, it is ranked #25. Click here to see additional POWR Ratings for Growth, Value, Momentum, and Sentiment. for ATEYY.

MaxLinear, Inc. (MXL)

MXL is an integrated circuit design company that provides radiofrequency (RF), high-performance analog, and mixed-signal communications systems-on-chip solutions (SoCs) for the connected home, wired and wireless infrastructure, and industrial and multi-market applications worldwide. MXL is headquartered in Carlsbad, Calif.

On April 13, Advantech, a global leader in industrial IoT, collaborated with MXL for the use of MXL’s PCIe UARTs and Multiprotocol Serial Transceivers for High-Performance Modular Industrial PCs. “We are proud to have a strong, long-term partnership with Advantech, who is at the cutting edge of high-performance industrial automation solutions,” said James Lougheed, VP of Marketing, High-Performance Analog for MXL. 

Also this month, MXL announced the expansion of its Ethernet product portfolio with the launch of two ethernet switches and a quad-port to extend its expertise in industrial markets where products must perform efficiently in harsh temperature environments. With the growing need for industrial-grade ethernet products, this development should enhance the company’s positioning in the fast-growing market.

MXL’s net revenues increased 27.3% year-over-year to $247.89 million in its fiscal fourth quarter, ended Dec. 31, 2021. Its gross profit improved 70.6% year-over-year to $141.78 million over the period, while its income from operations increased 224% from its year-ago value to $29.38 million. Its net income per share increased 206.1% year-over-year to $0.35 in the same period.

MXL’s revenue for the first quarter, ended March 31, 2022, is expected to come in at $260.13 million, indicating 24.3% year-over-year growth. The company’s EPS is expected to increase 65.8% year-over-year to $0.91 for the same quarter. MXL topped the Street’s EPS estimates in each of the trailing four quarters.

MXL stock has gained 32.2% in price over the past year and 12% over the past nine months to close the last trading session at $46.38. However, it has declined 38.5% year-to-date.

MXL’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system.

MXL is rated A in Growth. It is ranked #34 in the Semiconductor & Wireless Chip industry. To see additional POWR Ratings for Value, Quality, Momentum, Stability, and Sentiment for MXL, click here.

Click here to checkout our Semiconductor Industry Report for 2022

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MTSI shares were trading at $53.61 per share on Thursday morning, up $0.28 (+0.53%). Year-to-date, MTSI has declined -31.53%, versus a -5.23% rise in the benchmark S&P 500 index during the same period.

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About the Author: Komal Bhattar

Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

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