Technology

Deutsche Bank Says 4 Chip Stocks Very Compelling Buys Now

Maxim Integrated Products

This company supplies some chips to Samsung for the Galaxy S6. 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.

The company posted very positive second-quarter fiscal 2016 earnings, and it continues to be one of Wall Street’s favorite companies in the chip space. Last year Maxim was rumored to be in the sites of Avago, which went on to buy Broadcom. Rumors are swirling again that Maxim is a potential takeover target, this time with the Chinese company Tsinghua Unigroup mentioned as a potential buyer.

Maxim shareholders are paid a 3.59% dividend. The $40 Deutsche Bank price target for the stock is higher than the consensus target of $37.27. The shares closed most recently at $33.45.

MaxLinear

This is a smaller cap player that could provide big upside for investors. MaxLinear Inc. (NYSE: MXL) is a global provider of integrated, radio frequency and mixed-signal integrated circuits and systems-on-a-chips (SoCs). The company is a pioneer in multimedia over coax alliance (MoCA) technology and its products serve broadband communications and infrastructure industries, including cable TV, satellite TV, data center, metro and long-haul optical transport network applications.

Trading at a very reasonable 9.8 times estimated 2016 earnings, the stock is at a discount to peers. This is another company that could be a very viable takeover candidate. In addition, the company recently announced a partnership with Celeno Communications, a leading provider of high-performance Wi-Fi silicon and software solutions, to jointly developed reference design that combines the best in MoCA and Wi-Fi home network technologies to enable whole home gigabit Wi-Fi.

The Deutsche Bank price target for MaxLinear is posted at $20, and the consensus estimate is $20.50. The stock closed on Monday at $15.75, up 5% on the day.


All these companies avoid a dependence on the PC market and have very specialized and in-demand product silos. They make good sense for investors looking to add quality chip companies to aggressive growth portfolios.

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