After a very rough stretch that included a defective phone and an alleged corruption scandal involving the company’s vice chairman and former South Korean president Park Geun-hye, Samsung has roared back into prominence. The company posted second-quarter operating profit of 14.1 trillion won ($12.68 billion), topping the first quarter as the highest ever. In addition, Samsung said it expects the memory chip boom to continue in the current quarter, after reporting a record operating profit for the three months through June.
This is not only huge for the world’s biggest maker of memory chips, smartphones and television sets, it’s also massive for the companies that do business with Samsung. In a new research report from RBC, the analysts make the case that five companies could be very positively affected by the company’s turnaround, and aggressive tech investors should perhaps consider owning shares. The analysts noted in their report:
Favorable supply-demand conditions persisted in the memory market as strong demands from data center and servers more than offset gradually diminishing demand from mobile. Samsung’s memory market outlook is positive for semicap players as well as NAND-centric peers, while the company’s expectation that the global smartphone market would witness growth in second half of 2017.
Here are the five companies RBC thinks stand to benefit.
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 bested the Wall Street consensus estimate. Revenues rose 44.7% from last year and were right in line with the analysts’ view. Looking ahead, Applied Materials forecast third-quarter earnings per share well ahead of the Wall Street consensus estimate. The company also sees third-quarter revenues in a range much higher than the street view.
Shareholders receive a 0.85% dividend. The Wall Street consensus price target is $51.05, and shares closed Thursday at $46.04.
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.
Lam Research reported solid results and an impressive shipment outlook. The third-quarter fiscal 2017 non-GAAP earnings blew past the consensus estimate. Earnings were up 16% sequentially and about 131% year over year. Expectations are very high for fiscal fourth-quarter results as well.
Shareholders receive a 1.07% dividend. The consensus price objective is $166.65, and shares closed Thursday at $164.76.
Maxim Integrated Products
This company supplies chips to Samsung for the Galaxy line. 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.
RBC notes that the company has a 13% exposure in sales to Samsung, and the new Galaxy S8 is expected to be a huge success.
Investors receive a 3.16% dividend. The consensus price target is $47.91. Shares closed Thursday at $45.58.
RBC also likes this chip company, as it has a mid to high single-digit exposure to Samsung. Semtech Corp. (NASDAQ: SMTC) is a supplier of analog and mixed-signal semiconductor products. It designs, develops and markets a range of products for commercial applications, which are sold into the enterprise computing, communications, consumer and industrial end markets.
The company’s product lines include Signal Integrity, Protection, Wireless and Sensing, and Power and High-Reliability. Applications for the industrial market include video broadcast studio equipment, automated meter reading, wireless charging, military and aerospace, medical, security systems, automotive, Internet of Things, industrial and home automation, and video security and surveillance.
The consensus price target of $43.86 compares to Thursday’s close at $40.40.
This long-time innovator in the storage industry is a leader in the total addressable HDD market. Western Digital Corp. (NASDAQ: WDC) is an industry-leading developer and manufacturer of storage solutions that help to create, manage, experience and preserve digital content.
The company is responding to changing market needs by providing a full portfolio of compelling, high-quality storage products with effective technology deployment, high efficiency, flexibility and speed. Its products are marketed under the HGST and WD brands to original equipment manufacturers, distributors, resellers, cloud infrastructure providers and consumers.
The company reported strong fiscal fourth-quarter earnings that exceeded what Wall Street was looking for, while revenue for the quarter was in line with expectations.
Shareholders receive a 2.15% dividend. The consensus price target is a whopping $114.25. Shares closed most recently at $91.90.
These five top companies all look to benefit from Samsung’s continued success. With the Asian tech giant seemingly putting the worst behind it, the future looks very solid for the rest of 2017 and beyond.
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