Buy Micron (MU) & 3 More Semiconductor Stocks for Solid Gains

The semiconductor industry has been resilient to the negative impact of the pandemic-induced disruptions as well as geopolitical tensions, including the ongoing war between Russia and Ukraine. Chip-making companies have been one of the rare beneficiaries of the pandemic and saw sales soaring on higher demand for consumer electronic goods.

Moreover, several industry participants are struggling to meet the demand for microchips, thanks to the tightness in supply. This trend will aid the semiconductor industry, which is poised to grow further in 2022.

Micron Technology MU, last week, reported overwhelming second-quarter fiscal 2022 results, wherein the top and the bottom lines surpassed the respective Zacks Consensus Estimate and witnessed a significant year-over-year improvement as well. Higher memory chip demand from data center and graphics markets mainly aided the company’s second-quarter results.

Micron also provided strong guidance for the third quarter. The company’s revenue forecast of $8.7 billion (+/- $200 million) indicates a year-over-year increase of 17.3% while the non-GAAP EPS projection of $2.46 (+/-10 cents) suggests growth of 30.9% from the year-ago quarter.

Higher demand along with industry-wide supply constraints is anticipated to continue benefiting chip makers. Therefore, it will be prudent to invest in U.S. semiconductor stocks with a favorable Zacks Rank to tap the opportunities.

Apart from Micron, there are several stocks in the semiconductor industry that can provide better returns in the long run. We have zeroed in on three other stocks in addition to MU. These are — Advanced Micro Devices AMD, Broadcom AVGO and Synaptics SYNA.

The aforementioned stocks have the favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy). Per Zacks’ proprietary methodology, stocks with this combination offer good investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

Currently, Micron has a Zacks Rank #2 and carries a Growth Score of A. The long-term expected earnings growth rate for MU is pegged at 32%. The Zacks Consensus Estimate for fiscal 2022 earnings has moved up by 19 cents to $9.22 per share over the past seven days.

Semiconductor Long-Term Prospects Promising

Semiconductors are the backbone of the current-day technology-driven economy. Digitization across industries, adoption of cloud computing, and the integration of artificial intelligence and machine learning are likely to fuel demand for semiconductors.

The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to propel further growth. Apart from this, blockchain, Internet of Things, autonomous vehicles, augmented reality and virtual reality, and wearables hold scope for growth.

According to data compiled by the World Semiconductor Trade Statistics (WSTS), globally, semiconductor sales increased 26.2% to $556 billion in 2021. The market data provider forecasts worldwide semiconductor sales to reach $613.5 billion in 2022, implying growth of 10.4% from the 2021 level.

Remarkably, 2022 began on a strong note with semiconductor sales jumping in January. Citing data compiled by WSTS, Semiconductor Industry Association revealed that global semiconductor sales surged 26.8% in January to $50.7 billion from the prior year’s $40 billion.

Our Top Picks

Apart from having a favorable Zacks Rank and Growth Style Score, the aforementioned stocks have seen positive earnings estimate revisions.

Advanced Micro Devices: The company is riding on the robust performance of the Computing and Graphics, and Enterprise Embedded and Semi-Custom segments. AMD is benefiting from the strong sales of its Ryzen and EPYC server processors, owing to the increasing proliferation of AI and Machine Learning in industries like cloud, gaming and supercomputing.

The growing clout of 7-nanometer products in the data center vertical, driven by work-from-home and online learning trends, is a key catalyst for Advanced Micro Devices. The Xilinx acquisition will boost AMD’s data center business.

Zacks Rank #1 Advanced Micro Devices has a long-term expected earnings growth rate of 29.1% and carries a Growth Score of B. The Zacks Consensus Estimate for current-year earnings has improved 21.3% over the past 60 days.

Advanced Micro Devices, Inc. Price and Consensus

Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. Quote

Broadcom: This Zacks Rank #2 company is riding on continued strength across both Semiconductor solutions and Infrastructure software verticals. Higher demand for wireless solutions and sustained momentum in networking and broadband solutions bode well. Continued strong demand for next-generation PON with Wi-Fi 6 and 6C access gateways is driving prospects.

In the server storage connectivity domain, much of the growth is anticipated to be driven by the continued recovery of enterprise IT spending deployed toward upgrading computer services. An upbeat second-quarter fiscal 2022 guidance based on a strong uptick in broadband, networking and wireless revenues is encouraging.

The long-term expected earnings growth rate for Broadcom is pegged at 14.5%. The stock currently has a Growth Score of A. The Zacks Consensus Estimate for fiscal 2022 earnings has moved up by 7% to $35.49 per share over the past 30 days.

Broadcom Inc. Price and Consensus

Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote

Synaptics: The company is benefiting from its leadership position in designing and marketing human interface solutions such as touchpads for notebook computers, capacitive touch screen controllers for handsets and biometric fingerprint sensors for mobile devices. Continued strong demand for notebooks due to work from home and online learning is a major tailwind.

Synaptics carries a Zacks Rank #2 and has a Growth Score of A. The long-term expected earnings growth for the stock is pegged at 10%. The consensus mark for the company’s fiscal 2022 bottom line is pegged at $12.89 per share, up 15% in the past 60 days.

Synaptics Incorporated Price and Consensus

Synaptics Incorporated price-consensus-chart | Synaptics Incorporated Quote

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