3 Semiconductor Stocks to Buy After Strong Earnings on 2020 Chip Growth

Stocks continue to shine in November on the back of stronger-than-projected quarterly earnings results, solid U.S. jobs data, another interest rate cut, and some U.S.-China trade war progress. In fact, the Dow, S&P 500, and Nasdaq all touched brand new highs once again Friday morning.

Semiconductor equipment power Applied Materials AMAT saw its stock price soar over 9% to hit new highs after it topped quarterly estimates. Yesterday, Nvidia NVDA posted its fourth straight quarter of declines but showed signs of recovery in its growing cloud computing business and looks poised to return to impressive growth in the fourth quarter and beyond. And last month, the largest U.S. chip maker by revenue, Intel INTC raised its outlook and impressed Wall Street.

The semiconductor industry has been historically cyclical and recent runs of outsized success put some firms in hard-to-compare positions. Yet chip companies will remain a vital part of the ongoing technological revolution from cloud computing to artificial intelligence and integral for Amazon AMZN, Apple AAPL, Microsoft MSFT, and nearly everyone else.

With this in mind, we searched for semiconductor stocks utilizing our Zacks Stock Screener that investors might want to consider buying ahead of what could be a strong year for chip companies in 2020…

Advanced Energy Industries, Inc. AEIS

Advanced Energy’s power solution technologies are used within everything from data centers to semiconductor equipment. AEIS beat our Q3 earnings and revenue estimates on November 12 and is part of our Semiconductor Equipment - Wafer Fabrication industry, which rests in the top 2% of over 250 Zacks industries. CEO Yuval Wasserman said in prepared quarterly remarks that “demand for our products in the semi equipment market is improving on increased foundry/logic investments and the beginning of investment in memory.”

The Fort Collins, Colorado-headquartered firm officially completed its acquisition of Artesyn Embedded Power in September. AEIS shares have surged over 36% in the last three months and 50% in the past year as they try to fight back toward their Oct. 2017 highs.Our current Zacks Consensus Estimates call for its Q4 and Q1 2020 revenue to soar over 100%, boosted by its Artesyn purchase. Meanwhile, its fiscal 2020 sales are projected to surge 66% to $1.25 billion, with adjusted earnings expected to bounce back. AEIS is currently a Zacks Rank #1 (Strong Buy) based on its solid longer-term earnings estimate revisions and it has crushed our earnings estimates in the trailing three periods.

Inphi Corporation IPHI

Inphi makes semiconductor components and optical subsystems for networking OEMs, cloud computing and telecom companies, and more. We could get more technical, but all most investors need to know is that IPHI helps “move big data fast, around the globe, with high quality and reliability.” Like AEIS, Inphi topped our Q3 estimates recently and also posted record revenue and EPS, on the back of cloud and telecom strength. Plus, the company announced on November 11 that it plans to buy eSilicon for $216 million in both cash and the assumption of debt.

Inphi’s full-year 2019 sales are projected to jump 23% to help lift adjusted fiscal year earnings by 84%. Then the company’s 2020 revenue is expected to pop another 21% higher, with its EPS set to climb an additional 30%. IPHI is a Zacks Rank #2 (Buy) right now that sports an “A” grade for Growth in our Style Scores system. And the Santa Clara, California-based firm’s stock price is up 24% since it posted earnings in late October and 92% over the last 52 weeks.

Skyworks Solutions, Inc. SWKS

Skyworks Solutions is an analog semiconductor firm that is set to benefit from the roll out of 5G, the proliferation of the Internet of Things, and more as part of the broader wireless networking revolution. In keeping up with today’s theme, Skyworks topped our Q4 fiscal 2019 earnings and revenue estimates earlier this week on November 12. Skyworks has since seen its longer-term consensus earnings estimates climb. SWKS is expected to see its adjusted full-year 2020 EPS figure pop 1.1%, while 2021 is projected to come in 17.6% higher.

Meanwhile, Skyworks’ full-year FY20 sales are projected to pop 1.8%, with 2021 expected to jump another 9.3% to $3.76 billion. SWKS shares have soared 30% in the last three month and 50% in 2019, yet they still have room to run before they reach their 2017 highs. On top of that, Skyworks pays an annualized dividend of $1.76 per share at the moment, for a yield of 1.78%, which roughly matches the 10-year U.S. Treasury. SWKS is part of our Semiconductors - Radio Frequency industry that is in the top 7% of our industries and it holds a #2 (Buy) along with “B” grades for Value and Momentum.

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Skyworks Solutions, Inc. (SWKS): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
Microsoft Corporation (MSFT): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
Intel Corporation (INTC): Free Stock Analysis Report
Inphi Corporation (IPHI): Free Stock Analysis Report
Advanced Energy Industries, Inc. (AEIS): Free Stock Analysis Report
Applied Materials, Inc. (AMAT): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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