SMH's Underlying Holdings Could Mean 12% Gain Potential

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel , we have compared the trading price of each holding against the average analyst 12-month forward target price, and computed the weighted average implied analyst target price for the ETF itself. For the Semiconductor ETF (Symbol: SMH), we found that the implied analyst target price for the ETF based upon its underlying holdings is $94.34 per unit.

With SMH trading at a recent price near $84.39 per unit, that means that analysts see 11.79% upside for this ETF looking through to the average analyst targets of the underlying holdings. Three of SMH's underlying holdings with notable upside to their analyst target prices are Microchip Technology Inc (Symbol: MCHP), Qorvo Inc (Symbol: QRVO), and Skyworks Solutions, Inc. (Symbol: SWKS). Although MCHP has traded at a recent price of $81.24/share, the average analyst target is 16.20% higher at $94.40/share. Similarly, QRVO has 14.80% upside from the recent share price of $67.77 if the average analyst target price of $77.80/share is reached, and analysts on average are expecting SWKS to reach a target price of $116.18/share, which is 14.35% above the recent price of $101.60. Below is a twelve month price history chart comparing the stock performance of MCHP, QRVO, and SWKS:

MCHP, QRVO, and SWKS Relative Performance Chart

Combined, MCHP, QRVO, and SWKS represent 8.69% of the Semiconductor ETF. Below is a summary table of the current analyst target prices discussed above:

Name Symbol Recent Price Avg. Analyst 12-Mo. Target % Upside to Target
Semiconductor ETF SMH $84.39 $94.34 11.79%
Microchip Technology Inc MCHP $81.24 $94.40 16.20%
Qorvo Inc QRVO $67.77 $77.80 14.80%
Skyworks Solutions, Inc. SWKS $101.60 $116.18 14.35%

Are analysts justified in these targets, or overly optimistic about where these stocks will be trading 12 months from now? Do the analysts have a valid justification for their targets, or are they behind the curve on recent company and industry developments? A high price target relative to a stock's trading price can reflect optimism about the future, but can also be a precursor to target price downgrades if the targets were a relic of the past. These are questions that require further investor research.

10 ETFs With Most Upside To Analyst Targets »

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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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