Merrill Lynch Raises Price Targets on 4 White-Hot Momentum Stocks

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Lam Research

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.

Many Wall Street analysts have highlighted the company and its peers as having a significant equipment opportunity from the NAND evolution as well. Lam Research also appears well positioned to gain share in the wafer fab equipment market, driven by a strong focus on technology inflection spending over the next few years.

Despite so-so foundry and logic spending over the past year, many on Wall Street think that Lam will also continue to benefit from technology transitions such as FinFET, 3D NAND, multi patterning and advanced packaging in 2016 and beyond. Many analysts believe it is the “cleanest” semi-cap story benefiting from cyclical tailwind, SAM expansion and share gains.

The analysts noted that Lam Research reported solid results and an impressive shipment outlook. The posted third-quarter fiscal 2017 non-GAAP earnings blew past the consensus estimate. Earnings were up 16% sequentially and 130.9% year over year.

Investors in Lam Research are paid a 1.33% dividend. The $140 Merrill Lynch price target jumped to $165. That compares with a consensus price objective of $134.10. The shares closed up over 5% on Wednesday at $136.17.

Skyworks Solutions

This company has been on a roll since last summer. Skyworks Solutions Inc. (NASDAQ: SWKS) designs, develops, manufactures and markets proprietary semiconductor products, including intellectual property worldwide.

The product portfolio includes amplifiers, attenuators, battery chargers, circulators, DC/DC converters, demodulators, detectors, diodes, directional couplers, diversity receive modules, filters, front-end modules, hybrids, LED drivers, low noise amplifiers, mixers, modulators, optocouplers/optoisolators, phase shifters, phase locked loops, power dividers/combiners, receivers, switches, synthesizers, technical ceramics, VCOS/synthesizers and voltage regulators.

Last year there was some hot chatter that the company made an offer to buy Microsemi, which offers a comprehensive portfolio of semiconductor and system solutions for communications, defense and security, aerospace and industrial markets. The results of the potential deal remain to be seen.

Investors are currently paid a 1.13% dividend. The Merrill Lynch price objective was raised to $110 from $96, while the posted consensus target price is $101.42. Shares closed trading most recently at $99.24 apiece.

These four very hot momentum companies are just killing it on the earnings front, and making short-sellers hurt and hurt bad. While they have the possibility to go higher, buying partial positions at these levels makes sense, and see if they don’t come back in some in May and beyond.