The PHLX Semiconductor Index fell 1.8% on July 3 just before the market closed, after chip giant Micron (MU) was put under hot water when word got out of a Chinese court putting a block on sales in China of the company’s memory-chip products.
Fears are growing among investors apprehensive of a brewing trade war between U.S. and China. The latest piece of the puzzle will surely leave some running for the hills on semiconductor stocks. However, chief market analyst Michael Hewson at CMC Markets is staying bullish. Hewson believes that when sizing up the impact of a long-term trade war, “actually if you look at the data we’re seeing, the economic data is not that bad.” While Hewson admits not only “could it,” but “it will have a drag,” he counters: “But will it push the global economy into recession? Not yet.”
Here we turn to TipRanks’ market data to scope out which semiconductor stocks offer compelling upside potential for investors in uncertain times. After all, a bullish bet can pay off handsomely on a stock that can make it through the fire- even with trade war concerns spiraling. We have cherry-picked stocks below that all suggest growth when glancing at the 12-month average price target among analysts polled in the last 3 months. Let’s dive in:
1. Nvidia (NVDA)
Nvidia may have suffered an over 2% hit on July 3 in the aftermath of China’s slap at chip rival Micron, but analysts around the Street are mostly upbeat on this semiconductor giant.
Consider that Benchmark analyst Mike Burton just initiated coverage on Nvidia with a Buy rating and a $280 price target, which implies a confident 18% in upside potential from where the shares last closed. (See Mike Burton’s other stock recommendations). As far as Burton is concerned, the chip player stands at an advantage, “in the middle of many of the hottest computing trends.” Even if Burton sees the stock as somewhat expensive, he calls for Nvidia to outperform estimates on the back of “sustainable” growth-driven demand thanks to core data center markets along with a slated Volta product cycle for consumer GPUs.
FBN Securities analyst Shebly Seyrafi likewise joins the bullish camp, initiating coverage on Nvidia with an Outperform rating and a $300 price target (over 26% in return potential). (See Shebly Seyrafi’s other stock recommendations). While Nvidia was once a GPU machine, it since has become a “platform company,” writes Seyrafi. The analyst likes the odds on “one of the few plays on artificial intelligence and machine learning, key trends which are beginning to take off.”
This ‘Moderate Buy’ stock has garnered 16 recent buy ratings and a $292.45 consensus average price target that reflects nearly 24% in return potential. See NVDA Target Price and Analyst Ratings Detail.
2. Brooks Automation (BRKS)
Brooks Automation is another case of a falling domino semiconductor stock on the back of Micron’s conflict with China, taking a close to 2% plunge on July 3.
The small cap chip-equipment maker has a key bull in its corner, however. One of Wall Street’s top analysts FBR Craig Ellis (who has an impressive #4 ranking out of 4,826 analysts) recently assigned a Buy rating to BRKS stock with a $40 price target. (See Craig Ellis’ other stock recommendations) In other words, Ellis sees potential for this semiconductor player to rocket almost 27% in the next 12 months, cheering: “Further optimization potential exists.” The analyst gives kudos to the BRKS team for having “largely rebuilt” every business segment.
This ‘Moderate Buy’ stock has amassed 4 Buy ratings over the past 12 months and a consensus average price target of $37.25 (nearly 14% in upside potential). See BRKS Target Price and Analyst Ratings Detail.
3. Monolithic Power (MPWR)
Monolithic Power may have gotten a bit caught in the turbulence of the trade war volatility on July 3, but the growth of this stock bigger picture cannot be ignored. Worthy of note, the semiconductor stock has catapulted a whopping 469% in the last five years and could have the power to make it beyond the tricky China factor.
Oppenheimer analyst Rick Schafer, who ranks in the top 100 analysts out of 4,824 analysts on TipRanks recently reiterated an Outperform rating on the company. Moreover, the analyst hiked the price target on MPWR from $130 to $150 following a solid analyst day, calling for 13% in return potential. (See Rick Schafer’s other stock recommendations)
Specifically, Schafer is enticed by the corporate vision of Michael Hsing, CEO and founder of Monolithic Power, pinpointing “continued outsized organic growth and revenue acceleration” as two key reasons to bet bullish here. Bottom line, the analyst anticipates “investors underappreciate potential for growth acceleration” for a company who has a standout track record for “consistent execution.”
This ‘Strong Buy’ stock has scored unanimous bullish attention on the Street, with all 8 analysts polled in the last 3 months rating a Buy. The 12-month average price target stands at $146.00, marking 10% in return potential for the chip stock. See MPWR Target Price and Analyst Ratings Detail.
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This article was written by Julie Lamb