Stifel Says Jump on Semiconductor Pullback: 5 Stocks to Buy Now

Silicon Laboratories

This top chip company has been hit very hard and is offering the best entry point in some time. Silicon Laboratories Inc. (NASDAQ: SLAB) is an industry leader in the innovation of high-performance, analog-intensive, mixed-signal integrated circuits. Developed by a world-class engineering team with unsurpassed expertise in mixed-signal design, Silicon Labs’ diverse portfolio of patented semiconductor solutions offers customers significant advantages in performance, size and power consumption.

The company recently introduced a new family of high-performance crystal oscillators offering the industry’s lowest jitter frequency-flexible solution. These new crystal oscillators provide best-in-class frequency flexibility and excellent jitter margin for demanding applications including 100G/200G/400G line cards and optical modules, hyperscale data centers, broadband, wireless infrastructure, broadcast video, industrial, test and measurement, and military/aerospace.

Stifel has set its price objective at $82, and the consensus target price is $80.70. The shares closed trading on Wednesday at $69.45.

Inphi and Microsemi

The Stifel analysts also were very positive on two additional companies — Inphi Corp. (NYSE: IPHI) and Microsemi Corp. (NASDAQ: MSCC) — that have seen steep declines in the share prices. They cite very attractive valuations as a reason to buy them now.

Inphi is a strong contender in the data center arena. The company provides high-speed analog and mixed signal semiconductor solutions for the communications, data center and computing markets worldwide. Its end-to-end data transport platform delivers high signal integrity at leading-edge data speeds, addressing performance and bandwidth bottlenecks in networks, from fiber to memory. Inphi has solutions minimize latency in computing environments and enable the roll-out of next-generation communications infrastructure.

Many on Wall Street feel that the battle for dominance in outsourced cloud services between Amazon, Google, Microsoft and others, should continue to drive growth in data center capital expenditures. The analysts feel that Cloud Data Center customers are more likely to embrace Inphi’s exciting 100G products, like the PAM-4 solutions, ColorZ and others.

Inphi shares were down at one point 29% from highs. The Stifel price target is $52, and the posted consensus estimate is $47.30. The stock closed Wednesday at $38.52, up almost 5% on the day.

Microsemi could benefit from continued industrial demand. It offers a comprehensive portfolio of semiconductor and system solutions for communications, defense and security, aerospace and industrial markets. Products include high-performance and radiation-hardened analog mixed-signal integrated circuits; power management products; timing and synchronization devices and precise time solutions, setting the world’s standard for time; voice processing devices; RF solutions; discrete components; security technologies and scalable anti-tamper products; Ethernet solutions; power-over-Ethernet integrated circuits and midspans.

While it hasn’t actually announced a deal, Microsemi is said to still be running a sale process after receiving takeover interest from Skyworks Solutions, according to people familiar with the matter. Microsemi hired Bank of Montreal last year to run a broader auction after Skyworks offered to buy the company, the people said, asking not to be named because the negotiations are private. The process is in the early stages, no deal is imminent and a transaction may not occur.

The $65 Stifel price target compares with the consensus target of $63.09 and the most recent closing share price of $50.21.

While they are not suitable for all accounts, the lower prices in these top companies are attractive. With earnings right around the corner, it may make sense to buy partial positions and see how the results are.