Why SunTrust Says to Buy Automobile-Related Chip Stocks for 2016

Technology

Published: January 21, 2016 10:10 am

Last Updated: January 13, 2020 2:47 pm

Despite the heavy selling since the beginning of the year, there are still some very positive items tucked away in the books of economists. One of those tasty tidbits is automobile and truck sales. In fact, the U.S. auto industry set a sales record in 2015, as solid December gains by the biggest automakers pushed the annual tally above the 17,402,486 mark set in 2000. So it makes sense that whoever is supplying the big automakers should be doing well also.

A new SunTrust Robinson Humphrey research report makes the case that one way to cash in on the automakers’ success is by buying the semiconductor companies that supply critical chips to the industry. With demand showing signs of improvement, and a pickup expected in the transportation and industrial markets, there could be some big winners.

Four stocks are highlighted in the SunTrust report for investors to consider.

Cypress Semiconductor

This stock has been cut in half in less than a year. Cypress Semiconductor Corp. (NASDAQ: CY) produces high-performance, high-quality solutions for some of the most advanced embedded systems, from automotive, industrial and networking platforms to highly interactive consumer and mobile devices.

The broad, differentiated product portfolio that includes NOR flash memories, F-RAM and SRAM, Traveo microcontrollers, the industry’s only programmable system-on-chip (PSoC) solutions, analog and power management integrated circuits (PMICs), CapSense capacitive touch-sensing controllers and Wireless BLE Bluetooth low-energy and USB connectivity solutions.

The company recently announced an expansion of its automotive portfolio that will help enable manufacturers to bring high-tech automotive systems historically available only in luxury models to mainstream vehicles. Leveraging a wide range of differentiated products that includes microcontrollers (MCUs), PMICs, memories and touch-sensing solutions, the portfolio enables value-added systems for Cypress’s top tier automotive customers.

Cypress shareholders receive a big 5.76% dividend. The Thomson/First Call consensus price target for the stock is $12.27. Shares closed Wednesday at $7.64.