After absolutely rampaging over the last year, the PHLX Semiconductor Sector Index (SOX) corrected 7% since the highs posted in June. While the index has retraced some of the declines since early June, many of the valuations still look stretched. The good news is that some of the other stocks are looking much better, and top analysts on Wall Street are saying that this current pullback may be an outstanding chance for investors to jump in and grab some of the best companies, especially with earnings on the way.
A new Stifel research report makes the case that rather than an imminent cyclical downturn in the industry that forced the selling, overall rotation out may be the main factor in the decline. With industry fundamentals still looking positive, especially in the industrial and automotive sectors, the analysts think investors should buy some of the top companies now. They pound the table on three and like two others after steep declines in share price.
This stock spiked recently and has come back into a good buy range. Analog Devices Inc. (NASDAQ: ADI) is a leader in the design, manufacture and marketing of analog, mixed-signal and digital signal processing integrated circuits for use in industrial, automotive, consumer and communication markets worldwide. It offers signal processing products that convert, condition and process real-world phenomena, such as temperature, pressure, sound, light, speed and motion, into electrical signals.
The company recently introduced a highly integrated polyphase analog front end with power quality analysis designed to help extend the health and life of industrial equipment while saving developers significant time and cost over custom solutions. Achieving extremely accurate, high-performance power quality monitoring typically requires customized development, which can be expensive and time-consuming.
The analysts believe that the Linear Technology acquisition, which closed recently, is a big positive. In addition, many on Wall Street expect that corporate management ultimately will exceed its $150 million of targeted synergies. Toss in a very positive recent analysts day, and the signals look strong.
Analog Devices investors receive a 2.24% dividend. The Stifel price target for the stock is $97. The Wall Street consensus target is $95.02. The stock closed Wednesday at $80.37 per share.
Maxim Integrated Products
This company supplies chips to Samsung for the Galaxy line. Maxim Integrated Products Inc. (NASDAQ: MXIM) designs, develops, manufactures and markets various linear and mixed-signal integrated circuits worldwide. The company also provides a range of high-frequency process technologies and capabilities for use in custom designs. It primarily serves automotive, communications and data center, computing, consumer and industrial markets.
This stock has traded down over 10% since early June and could be a great company to own in front of earnings. It has beaten the earnings projections for each of the past six operational quarters, and it is projected to for this quarter as well by some analysts.
Stifel has a $36 price target for the shares, while the consensus target is $35. The stock closed Wednesday at $46.70.