A global semiconductor shortage has created a bottleneck in the automobile and consumer electronics industries. Under the U.S. Competition and Innovation Act, a federal investment of $52 billion in the semiconductor industry has been allocated to boost production and support the expansion of semiconductor foundries.
As a result, the semiconductor industry is expected to thrive this year. In fact, according to the World Semiconductor Trade Statistics (WSTS), the worldwide semiconductor market is expected to grow 19.7% year-over-year in 2021.
Given the industry’s solid growth prospects, KLA Corporation (KLAC), Amkor Technology, Inc. (AMKR), Silicon Motion Technology Corporation (SIMO), and DSP Group, Inc. (DSPG) are expected to grow significantly in the coming months. So, these stocks could be solid bets now.
Click here to checkout our Semiconductor Industry Report for 2021
KLA Corporation (KLAC)
KLAC designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nanoelectronics industries worldwide. KLAC is based in Milpitas, Calif.
On June 22, KLAC announced the launch of four new, improved products for automotive chip manufacturing. Amid the growing automotive electronics ecosystems robust demand for semiconductor chips, this launch should allow the company to remain a leading player in the industry.
KLAC’s total revenues increased 31.9% year-over-year to $1.93 billion in its fiscal fourth quarter, ended June 30. Its net income improved 53.9% year-over-year to $632.98 million. The company’s EPS increased 55.9% year-over-year to $4.10. Its cash and cash equivalents balance rose 16.2% from the prior-year quarter to $1.43 billion over this period.
Analysts expect KLAC’s revenues to increase 29.2% year-over-year to $1.92 billion in the current quarter, ending September 2021. A $4.13 consensus EPS estimate for the current quarter indicates a 36.3% rise from the same period last year. Moreover, KLAC surpassed the Street’s EPS estimates in each of the trailing four quarters. Shares of KLAC have gained 75.9% over the past year and 34.5% year-to-date.
It is no surprise that KLAC has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has an A grade for Quality, and B for Sentiment and Momentum. Among the 99 stocks in the B-rated Semiconductor & Wireless Chip industry, KLAC is ranked #16.
To see additional KLAC ratings for Growth, Value, and Stability, click here.
Amkor Technology, Inc. (AMKR)
AMKR in Tempe, Ariz., provides outsourced semiconductor packaging and test services in the United States, Japan, Europe, the Middle East, Africa, and the Asia Pacific. It offers packaging and test services, including semiconductor wafer bump, wafer probe, wafer backgrind, package design, packaging, system-level, and final test and drop shipment services.
AMKR’s net sales increased 19.9% year-over-year to $1.41 billion in its fiscal second quarter, ended June 30. Its operating income grew 79.3% from its year-ago value to $155.12 million. AMKR’s net income came in at $125.81 million, indicating a 127% rise year-over-year. The company’s EPS increased 121.7% year-over-year to $0.51.
The Street expects AMKR’s revenues to rise 20.6% year-over-year to $1.51 billion in the current quarter, ending September 2021. A $0.44 consensus EPS estimate for the current quarter indicates a 15.8% improvement year-over-year. AMKR has an impressive earnings surprise history also. It beat the consensus EPS estimates in each of the trailing four quarters. Shares of AMKR have gained 85.8% over the past year and 67.5% year-to-date.
It’s no surprise that AMKR has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. AMKR has an A grade for Value, and a B for Growth, Sentiment, and Momentum. It is ranked #4 in the Semiconductor & Wireless Chip industry.
To see additional POWR Ratings for Stability and Quality, click here.
Silicon Motion Technology Corporation (SIMO)
SIMO designs , develops and markets NAND flash controllers for solid-state storage devices. The Zhubei City, Taiwan, company offers SSDs used in PCs and other devices, as well as eMMC and UFS mobile embedded storage used in smartphones and IoT devices. On July 26, SIMO announced a $0.35 per ADS dividend payment, equivalent to $0.0875 per ordinary share. The dividend is to be paid on August 19.
SIMO’s net sales increased 61.6% year-over-year to $221.10 million in its fiscal second quarter, ended June 30. Its gross profit stood at $111.13 million, up 62.5% from the same period last year. Its net income increased 75.6% from its year-ago value to $49.55 million. The company’s earnings per ADS increased 77.5% year-over-year to $1.42.
A $212.48 million consensus revenue estimate for its fiscal third quarter (ending September 2021) indicates a 77% increase year-over-year. The Street expects the company’s EPS to rise 76.3% from the prior-year quarter to $1.34 in the current quarter. In addition, SIMO surpassed the consensus EPS estimates in each of the trailing four quarters.
SIMO has gained 84.4% over the past year to close yesterday’s trading session at $76.28. The stock has gained 55.7% year-to-date.
SIMO has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. SIMO has a B grade for Growth, Value, Sentiment, and Quality. It is ranked #8 in the Semiconductor & Wireless Chip industry.
Click here to view additional SIMO ratings for Momentum and Stability.
DSP Group, Inc. (DSPG)
DSPG is a semiconductor company that provides wireless chipset solutions worldwide. It operates through three segments: Home; Unified Communications; and SmartVoice. DSP is based in Los Altos, Calif.
On July 19, DSPG and Cloud of Things collaborated to introduce a fully managed IoT cloud services gateway based on DSPG ULE module to provide interference-free, full-coverage wireless communications throughout the home or office. This product should be in wide demand given the increased adoption of connected devices across homes and enterprises over the past year.
Also in July, DSPG and Alango Technologies announced the availability of Alango’s Extended Voice Communication Package (eVCP) on DSP Group’s DBMD7 SmartVoice processor. This should enhance DSPG’s capabilities further, allowing its customers to leverage the full potential of the DBMD7 to bring high-end voice communication.
DSPG’s revenues increased 26.4% year-over-year to $35.81 million in its fiscal second quarter, ended June 30. Its gross profit grew 34.1% from its year-ago value to $19.13 million, while its non-GAAP net income improved 98.8% year-over-year to $3.21 million over the period. The company’s non-GAAP EPS increased 100% year-over-year to $0.12.
A $133.67 million consensus revenue estimate for the current year indicates a 16.8% improvement year-over-year. Analysts expect the company’s EPS to come in at $0.27 in the current year, indicating a 42.1% rise year-over-year. The company’s EPS is also expected to increase 60% year-over-year in the current quarter, ending September 2021. DPSG has gained 36.2% year-to-date. Over the past year, the stock gained 66.4%.
DSPG has an overall B rating, which equates to Buy in our proprietary rating system. The stock also has a B grade for Growth, Value, and Sentiment. It is ranked #14 in the Semiconductor & Wireless Chip industry.
Beyond what we’ve stated above, we have also rated DSPG for Momentum, Quality, and Stability. Click here to see more of DSPG’s component grades.
Click here to checkout our Semiconductor Industry Report for 2021
KLAC shares were trading at $345.10 per share on Tuesday afternoon, down $0.81 (-0.23%). Year-to-date, KLAC has gained 34.06%, versus a 18.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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