Semiconductor stocks have seen solid returns in 2021. As a result, the PHLX Semiconductor Sector Index (SOX) is up around 12.5% in the past 12 months. Meanwhile, numbers from the World Semiconductor Trade Statistics show that global sales in the industry will likely grow close to 9% in 2022.
Yet, despite these positive prospects, many semiconductor stocks have started the new year on a down note. In fact, the widely-followed SOX index is down about 11.5% so far in January.
With the recent sell-off in leading names like Advanced Micro Devices (NASDAQ:AMD), chip investors are increasingly focusing on steady growers with more moderate valuations. In recent years, the Federal Reserve has helped boost semiconductor stocks with expansionist policies, but it is currently moving in the opposite direction.
As a result, capital is already moving away from tech to other sectors that benefit from higher interest rates. Investors can no longer rely on the soaring liquidity that has boosted the entire industry for the past few years.
Despite solid earnings, the semiconductor industry is not immune to changes in capital flows. Therefore, being more selective about chip companies is a prudent strategy. With that information, here are seven semiconductor stocks that offer good value:
- Amkor Technology (NASDAQ:AMKR)
- KLA (NASDAQ:KLAC)
- KraneShares CICC China 5G & Semiconductor ETF (NYSEARCA:KFVG)
- NXP Semiconductors (NASDAQ:NXPI)
- Qorvo (NASDAQ:QRVO)
- Qualcomm (NASDAQ:QCOM)
- Skyworks Solutions (NASDAQ:SWKS)
Semiconductor Stocks: Amkor Technology (AMKR)
52-week range: $15.51 – $29.50
Dividend Yield: .9%
Tempe, Arizona-based Amkor Technology provides outsourced semiconductor packaging and test services to manufacturers, fabless semiconductor companies and contract foundries. Its test technology solutions enjoy strong demand.
Amkor Technology released third-quarter 2021 results in late October, recording record quarterly revenue of $1.68 billion — up 24% year-over-year (YOY). Net income came in at a record $181 million, or 74 cents per diluted share, up from $92 million, or 38 cents per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $546 million. Wall Street was pleased with its high profit margins.
On these metrics, CEO Giel Rutten said, “We delivered an outstanding third quarter with record revenue of $1.68 billion, up $274 million from the second quarter, reflecting a 20% sequential increase.”
In November, Amkor Technology announced plans to invest $1.6 billion to launch a manufacturing plant in Vietnam. Wall Street will be watching the outcome of this investment.
AMKR hovers under $25, up 18% over the past 12 months. Shares look like a screaming buy at just 9.5 times forward earnings and 1 times trailing sales. The 12-month median price forecast for Amkor Technology stock is $27.50.
KLA (KLAC)
52-week range: $273.24 – $457.12
Dividend yield: 1.1%
Milpitas, California-based KLA provides process control and yield management solutions for the semiconductor industries. In fact, the company is the global market leader in process control, which enjoys strong growth.
KLA issued Q1 FY22 numbers in late October. Revenue increased 35% YOY to $2.08 billion. Net income came in at $712 million, or $4.64 earnings per diluted share, up 50% YOY from $475 million, or $3.03 per diluted share, a year ago. The company generated a free cash flow of $795 million. Cash and equivalents ended the quarter at $1.5 billion.
On the results, CEO Rick Wallace remarked, “KLA’s track record of consistent execution and sustainable outperformance was evident during the September 2021 quarter, demonstrating the strong momentum in our core markets and the attractive operating leverage inherent in the KLA financial model.”
KLA stock is currently priced around $380. Over the past 12 months, it has jumped 24%. Shares are trading at 19.7 times forward earnings and 8.5 times trailing sales. The 12-month median price forecast for KLA stock stands at $453.
Semiconductor Stocks: KraneShares CICC China 5G & Semiconductor ETF (KFVG)
52-Week Range: $22.03 – $29.85
Expense Ratio: 0.64% per year
Our next discussion focuses on an exchange-traded fund (ETF) and takes us overseas. The KraneShares CICC China 5G & Semiconductor ETF offers exposure to China’s 5G and semiconductor companies listed in mainland China, Hong Kong, and the U.S.
KFVG tracks the performance of the CICC China 5G and Semiconductor Leaders Index, which measures the performance of 5G and chip names, including 5G equipment companies and big data centers.
China is a global leader in 5G spending and adoption. By 2025, the country should accounting for 40% of global 5G customers with more than 400 million 5G users. In addition, the Chinese government has put the chip sector in the limelight by providing high levels of funding. Thus, the country is becoming more self-sufficient in semiconductor manufacturing
KFVG has 52 holdings. Since its inception in November 2020, net assets have grown to $33.3 million. The top ten names account for close to 55% of the fund. Therefore, it is top heavy.
The leading stocks on the roster include technology conglomerate Xiaomi (OTCMKTS:XIACF), internet solutions provider Luxshare Precision Industry and mix-signal integrated circuit (IC) manufacturer Will Semiconductor.
Over the past year, the ETF has declined by 18%. KFVG’s price-to-earnings (P/E) and price-to-book (P/B) ratios stand at 29.63 and 4.58, respectively. Interested readers who expect Chinese stocks to benefit, especially from domestic growth, could consider buying the dips.
NXP Semiconductors (NXPI)
52-week range: $156.02 – $239.91
Netherlands-based NXP Semiconductors provides high-performance mixed-signal products. The firm has a significant market share in the automotive market, which uses its microcontrollers and analog chips.
NXP announced Q3 results on Nov. 1. Revenue jumped 26% YOY to $2.86 billion. Non-GAAP operating income grew at a 64% rate to $959 million, up from $586 million a year ago. The chipmaker generated free cash flow of $724 million.
More than half of NXP’s revenue comes from the automotive industry. Its products are mainly used in battery management, powertrain parts, driver-assist hardware and infotainment. Therefore, NXPI is an attractive stock for investors interested in the growth of electric vehicles (EVs).
NXPI stock is currently priced just above $200, up 15% over the past 12 months. Shares are trading at 18.9 times forward earnings and 6.1 times trailing sales. The 12-month median price forecast for NXP Semiconductors stock is $250.
Semiconductor Stocks: Qorvo (QRVO)
52-week range: $135.46 – $201.68
Greensboro, North Carolina-based Qorvo provides technologies and radio frequency solutions for mobile as well as aerospace and defense (A&D) applications. Its products include amplifiers, frequency converters, transistors, ICs and optical components.
Qorvo released Q2 FY22 financials in early November. Revenue increased to $1.26 billion. Net income stood at $384.5 million, or $3.42 per diluted share. Cash and equivalents ended the quarter at $1.15 billion.
Wall Street expects Qorvo to benefit from the booming 5G smartphone market as it boasts a solid mobile client base. Its radio frequency (RF) chips are used by smartphone manufacturers such as Apple (NASDAQ:AAPL), Vivo and Samsung (OTCMKTS:SSNLF). Its mobile business reported a 32% YOY increase in revenue.
CFO Mark Murphy said, “After achieving a record September quarter, we expect December quarter revenue to decrease sequentially amidst ongoing supply challenges and other factors impacting global smartphone demand.”
In early November, QRVO acquired United Silicon Carbide, a leading manufacturer of silicon carbide power semiconductors. The acquisition enhances Qorvo’s reach into high-growth markets such as EVs, industrial power and renewables.
QRVO stock is currently priced at $135, down 28% over the past 12 months. Shares are trading at just 12.4 times forward earnings and 4 times trailing sales. The 12-month median price forecast for Qorvo stock stands at $208, and it deserves your attention.
Qualcomm (QCOM)
52-week range: $122.17 – $193.58
Dividend yield: 1.6%
San Diego, California-based Qualcomm is a leader in 5G network technology and the largest wireless chip provider globally. Therefore, the chipmaker will benefit from the ongoing 5G upgrade cycle, as no 5G phone can run without its chipset.
Grand View Research forecasts a compound annual growth rate (CAGR) of almost 70% for the global smartphone chipset market from 2021 to 2028, implying significant tailwinds for long-term growth.
Qualcomm released Q4 results in early November. Revenue increased 43% YOY to $9.34 billion. Non-GAAP net income came in at $2.9 billion, or $2.55 earnings per diluted share, up 76% YOY from $1.7 billion in the prior-year quarter. Cash and equivalents ended the period at $7.1 billion.
On the results, CEO Cristiano Amon remarked, “As of fiscal 2021, we are exceeding our 2019 Analyst Day targets for revenue growth and diversification and operating margin expansion, while more than doubling our year-over-year Non-GAAP EPS.”
Apple’s purchase of Intel‘s (NYSE:INTC) smartphone chipset business led to investor concerns that the iPhone would no longer use Qualcomm chipsets. However, such fears have not so far materialized. Management forecasts high growth in chip demand especially for autonomous driving to easily compensate for a potential decline in sales to Apple.
QCOM stock sells for around $165, flat over the past 12 months. Shares are trading at low multiples of 15.8 times forward earnings and 5.7 times trailing sales. The 12-month median price forecast for Qualcomm stock is $208.
Semiconductor Stocks: Skyworks Solutions (SWKS)
52 week range: $140.26 – $204
Dividend Yield: 1.6%
Irvine, California-based Skyworks Solutions offers semiconductors for wireless devices. Its products primarily include power amplifiers, filters, and switches.
Skyworks is a key supplier of wireless chips for the iPhone. More than half of its revenue comes from Apple, which is expected to sell more than 300 million iPhones in 2022.
The chip group reported Q4 and full-year numbers in early November. It hit a record revenue of $1.31 billion, up 37% YOY. Net income soared 42% YOY to $326.3 million, or $1.95 per diluted share, up from $266.1 million, or $1.46 per diluted share, in the prior-year period. Cash and equivalents ended the quarter at $883 million.
On the metrics, CEO Liam K. Griffin remarked, “Skyworks set new records for revenue and earnings for the fourth quarter and the fiscal year, delivering significant year-over-year growth in response to robust demand across our expanded product portfolio.”
SWKS stock hovers around $140 territory, down 14% over the last 12 months. Given its robust growth potential, shares look significantly undervalued at just 14 times forward earnings and 5.3 times trailing sales. The 12-month median price forecast for Skyworks stock stands at $210.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.