With worldwide sales topping more than $400B per year and more than $800B in industry-wide market capitalization, semiconductors are big business. However, stocks in chip makers are currently being buffeted by rising interest rates, so a smart investor will do the homework before putting down the money.
“Rising rates will disproportionately affect the tech sector” Chris Zaccarelli of Independent Advisor Alliance told CNBC earlier this month.
With this in mind, let’s take a closer look at what TipRanks’ top rated analysts say about these 3 hot chip stocks now. This provides a valuable insight into the outlook for these stocks over the next 12 months- according to analysts who consistently outperform the market. Are these stocks poised to rebound or to fall? Let’s see:
Qualcomm Incorporated (QCOM – Research Report)
By sales volume, Qualcomm holds the number 4 spot among the world’s semiconductor producers. The company is based in San Diego, California, where it was founded in 1985. Qualcomm has been involved in legal issues in recent years, including issues of gender discrimination and a major dispute with Apple on matters of overcharging. The Apple suit involves claims and counter-claims, with Qualcomm accusing Apple of illegally passing trade secrets to Intel.
These legal issues have impacted Qualcomm in the markets. The company has the smallest upside potential of the stocks examined here, at 10%, but Qualcomm maintains a ‘Moderate Buy’ rating, rather than a ‘Hold.’ The current share price is $66, with an average price target of $72.75.
Regarding the lawsuits, Amit Daryanani (Track Record & Ratings) of RBC Capital says, “We think QCOM should continue to work higher as we get incremental clarity on its resolution with AAPL & Huawei.” He continues: “While we realize the next 12 months will be “noisy” given 6+ different court cases … the baseline assumption for us remains that the two parties will reach a settlement over the next [nine] months as there is high probability that AAPL would need QCOM as it transitions to 5G devices in FY20.”
Writing for Nomura, Romit Shah (Track Record & Ratings) agrees: “We’ve been recommending Qualcomm shares on the premise that we believe the Apple dispute would be resolved by the end of the year and Qualcomm stands to benefit greatly from a resolution.” Daryanani and Shah give QCOM price targets of $77 and $80 (21% upside potential), respectively.
Texas Instruments Incorporated (TXN – Research Report)
Texas Instruments, appropriately based in Dallas, became a world leader in transistor technology during the 1950s and invented the hand-held pocket calculator in 1967. The company was the market leader in calculators through the 1980s, and its 1990 TI-81 graphing calculator spawned a series of successors that are still in production today (this writer used a TI-81 in high school, and recently purchased a successor model for his own teenager).
TI is the world’s eighth largest producer of digital semiconductors, and the largest producer of analog technology. It has a market cap of $98B, holds more than 45,000 patents worldwide, and is considered a solid performer in the stock markets, with steady gains in share price and consistent dividend pay-outs in the 2 to 3% range.
Top analysts agree with the upbeat outlook on TI. Susquehanna’s Christopher Rolland (Track Record & Rating) gives TXN stock a $120 target price for an 18% upside. Oppenheimer’s Rick Schafer (Track Record & Ratings) goes further, saying, “We view TXN as the top diversified steward of capital in the group with an established record of consistent execution. We remain long-term buyers with $130 target.”
TXN’s current share price $101 and the average price target is $126, giving it an excellent 24% upside. The analyst consensus on this reliable stock is a ‘Moderate Buy.’
Micron Technology, Inc. (MU – Research Report)
Micron dates back to 1978. The company, headquartered in Boise, Idaho, produces a variety of memory chips and solid-state drives, and is considered well-positioned to take advantage of advances in AI technology.
By sales volume, Micron Technology is ranked seventh among the ten biggest players in the semiconductor industry, but among the stock we’re looking at here, it has undisputedly the best outlook: a 64% upside, based on a current share price of $42 an average target price of $69.
That rosy outlook comes from the company’s strong position in the AI field. Harlan Sur (Track Record & Ratings) of J.P. Morgan says that he, “…expects the demand for memory and storage to accelerate as AI workloads proliferate. Further, Micron itself is benefiting from the use of AI in its own factories which is helping improve yield ramps and increasing factory output.” This matters because AI is "truly at its early stages with a long runway for growth."
Sur gives MU a price target of $75.
Amit Daryanani (Track Record & Ratings) agrees with Sur about MU’s natural advantage in artificial intelligence tech. He says, “The discussions of artificial intelligence technology being deployed in consumer, business, and automotive environments are a positive for the company's memory products.”
Sometimes a review is short because it takes longer to explain shortcomings than advantages. The top analysts have nothing bad to say about MU stock. Among Micron’s recent reviews, 15 are ‘Buy’ and the analyst consensus on this stock is a ‘Strong Buy.’
Author: Michael Marcus