Stocks climbed in afternoon trading Tuesday to end the day sharply higher, as Wall Street begins the busy part of the second quarter earnings season. Citigroup C and JPMorgan Chase JPM both topped our quarterly Zacks estimates, despite the ongoing coronavirus economic downturn and continued uncertainty.
The Dow closed over 550 points higher, driven by gains from Caterpillar CAT and many others. Meanwhile, the S&P 500 jumped 1.3% and the Nasdaq climbed roughly 1%. This positivity comes despite the fact that places around the U.S. are rolling back their reopening plans amid spikes in coronavirus cases. On top of that, overall S&P 500 earnings are projected to sink 44.8% from the same period last year on 10.7% lower revenues (also read: What Will Q2 Bank Earnings Reveal?)
That said, Wall Street has seemingly decided to focus on the positive signs of an economic recovery in the U.S. And the worst of the pandemic’s economic impact is likely over, especially since it’s hard to imagine the political will for another broad-based lockdown exists—unless things turn far worse.
With all this in mind, tech stocks might remain the star of the show as the comeback moves forward. We also saw chip stocks, including NXP Semiconductors NV NXPI, Lam Research LRCX, and others all jump Tuesday.
So let’s dive into three semiconductor stocks that investors might want to consider buying for near-term coronavirus growth and beyond...
Advanced Energy Industries, Inc. AEIS
Advanced Energy’s power solution technologies are used within everything from data centers to telecommunications and semiconductor equipment. The Colorado-headquartered firm completed its acquisition of Artesyn Embedded Power back in September 2019 to help it become what it calls a “premier global power conversion company.” This deal has helped AEIS expand significantly, highlighted by roughly 120% top-line growth in Q4 and Q1. AEIS has also topped our quarterly earnings estimates in the trailing four periods by an average of 35%, including a 42% beat in the first quarter.
AEIS is part our Semiconductor Equipment - Wafer Fabrication space that rests in the top 20% of our more than 250 Zacks industries. The company’s solid upward earnings revisions help it grab a Zacks Rank #2 (Buy) right now, alongside an “A” grade for Momentum and a “B” for Growth in our Style Scores system. AEIS shares have soared nearly 100% since March 18 to top its industry’s 83% expansion. Despite the run, Advanced Energy stock rests 10% below its 52-week highs, which could give it more room to run. And AEIS trades at a major discount against its industry average, at 2.1X forward 12-month sales vs. 7.8X.
Our current Zacks estimates call for Advanced Energy’s adjusted second quarter earnings to surge 82% to $0.82 per share, on the back of 133% higher revenue growth. AEIS is then projected to see its fiscal 2020 sales climb another 56% to $1.23 billion—boosted by its Artesyn deal. Plus, its adjusted earnings are expected to jump 26% in 2020 and another 18% in fiscal 2021.
Nvidia built its reputation as a GPU power that benefited from the booming gaming market for years. Its more recent expansion into data centers, cloud computing, AI and more has wowed Wall Street. Nvidia in late April also closed its $7 billion acquisition—its largest ever—of Mellanox Technologies to help bolster its data center business and more. NVDA stock is up 76% in 2020 and 150% in the last 12 months, against its industry’s 45% climb. The company also recently surpassed Intel INTC to become the largest U.S. semiconductor maker by market value at $255 billion.
NVDA topped our Q1 estimates back in May, with revenue up 39%, driven by an 80% climb in data center revenue, which crossed the $1billion threshold for the first time. And NVDA’s new Ampere architecture is set to play a key role within the AI-focused chips and in cloud computing. Nvidia’s earnings estimates have turned far more positive since its Q1 beats to help it earn a Zacks Rank #2 (Buy) at the moment.
Moving on, our Zacks estimates call for its revenue to jump 42% and 33%, respectively in Q2 and fiscal 2021. Meanwhile, NVDA’s adjusted earnings are projected to soar 57% and 36.5% over this same stretch. And Nvidia’s adjusted FY22 EPS figure is projected to jump another 22% on 18% higher sales to help highlight its longer-term growth potential. The company also pays a dividend and its balance sheet is solid.
Marvell Technology Group Ltd. MRVL
Marvell offers semiconductor solutions for storage, processing, networking, security, and connectivity. MRVL topped our Q1 FY21 estimates in late May, with revenue up 5%. Marvell’s Q1 sales were driven by “stronger demand” for its “networking products from the datacenter and 5G infrastructure end markets.” CEO Matt Murphy said in prepared remarks that while it did “experience some COVID-19 supply chain impacts on our storage business in the first quarter, we expect a bounce back in the second quarter and we project our networking business to continue to grow.”
The infrastructure semiconductor solutions firm’s revenue is projected to jump 9.7% in the second quarter and climb 17.4% in Q3, based on our current Zacks estimates. MRVL’s full-year fiscal 2021 sales are then expected to jump 11.6% to hit $3.01 billion, with FY22 projected to climb another 16% higher—both of which would mark significant improvements from FY20’s 6% downturn. Marvell’s adjusted earnings are projected to surge 25% in Q2 and 47% in Q3 to help lift its FY21 EPS figure by 40% to $0.92 a share. Better still, its adjusted FY22 earnings are projected to climb 50% above our current-year estimate.
Marvell’s positive earnings revision trends help it earn a Zacks Rank #2 (Buy) right now. Meanwhile, MRVL stock has climbed 40% in 2020 and nearly 100% since the market’s March 23 lows. This is part of a larger run over the last five years that has seen Marvell stock jump roughly 200%. Alongside this growth, investors grab a dividend yield that currently matches the 10-year U.S. Treasury’s payout.
5 Stocks Set to Double
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Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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JPMorgan Chase Co. (JPM): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
Citigroup Inc. (C): Free Stock Analysis Report
Intel Corporation (INTC): Free Stock Analysis Report
Caterpillar Inc. (CAT): Free Stock Analysis Report
Lam Research Corporation (LRCX): Free Stock Analysis Report
Marvell Technology Group Ltd. (MRVL): Free Stock Analysis Report
Advanced Energy Industries, Inc. (AEIS): Free Stock Analysis Report
NXP Semiconductors N.V. (NXPI): Free Stock Analysis Report
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