Needless to say, the semiconductor and semiconductor capital equipment industries have been on fire this year. With demand from the new iPhones, Internet of Things (IoT) infrastructure build-outs, automotive (which is being pushed by autonomous driving) and a host of additional positives, the road forward looks bright.
The one issue for many investors is the huge run up in the prices of many of the top stocks, which makes the risk-reward far less enticing as compared with this time last year. We screened the JPMorgan research database for chip and chip equipment stocks that were rated Buy but still had solid upside to the firm’s price target. All are rated Overweight.
Some on Wall Street feel this semiconductor capital equipment leader has the broadest range of exposure to 3D NAND and foundry display. Applied Materials Inc. (NASDAQ: AMAT) is the global leader in precision materials engineering solutions for the semiconductor, flat panel display and solar photovoltaic industries. Applied Material’s technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world.
The company reported second-quarter earnings that were better than the Wall Street consensus estimate, and revenues rose more than 44% from the same period of last year and was right in line with the analysts’ view. Looking ahead, Applied Materials forecast third-quarter earnings per share and revenue that are well ahead of the consensus forecast.
Applied Materials shareholders are paid a small 0.85% dividend. The JPMorgan price target for the stock is $56, and the Wall Street consensus target is $55.50. The shares closed Thursday’s trading at $47.15 apiece.
This leader in semiconductors is working hard to scale away from dependence on personal computers, and the Internet of Things is a big part of the shift. Intel Corp. (NASDAQ: INTC) designs, manufactures and sells integrated digital technology platforms worldwide.
The company’s platforms are used in various computing applications comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.
Earlier this year, Intel announced the purchase of Mobileye for more than $15 billion. The Israel sensor company gives the chip giant a leg up in the autonomous car competition, and it also adds many other capabilities. This is expected to be a big IoT segment going forward.
This is so huge that Intel expects the computing total addressable market (TAM) in autos to significantly outpace vehicle unit TAM. In fact, by Intel’s estimates, autonomous cars will demand 10-times increase in compute throughput, a 1,000-times increase in pixels and 1,000-times increase in storage between 2017 and 2030. In dollar terms, that translates to in-car TAM (systems, data and services) of $70 billion and another $40 billion of TAM for autonomous driving-related data center spending.
Intel investors are paid a solid 2.93% dividend. JPMorgan has set its price target at $45, while the consensus price objective was last seen at $39.99. The stock closed on Thursday at $37.20 a share.
This remains one of the top chip equipment picks across Wall Street. Lam Research Corp. (NASDAQ: LRCX) designs, manufactures, markets, refurbishes and services semiconductor processing equipment used in the fabrication of integrated circuits. The company offers plasma etch products that remove materials from the wafer to create the features and patterns of a device.