Despite Caution in Semiconductors, SunTrust Has 5 Chip Stocks to Buy for 2018

Print Email
Monolithic Power Systems

This off-the-radar play could be offering continued upside potential. Monolithic Power Systems Inc. (NASDAQ: MPWR) designs, develops and markets integrated power semiconductor solutions and power delivery architectures for consumer, industrial, computing and storage, and communications market segments. It offers direct current (DC) to DC converter integrated circuits (ICs) that are used to convert and control voltages of various electronic systems, such as portable electronic devices, wireless LAN access points, computers, monitors, automobiles and medical equipment.

The company also provides lighting control ICs for backlighting that are used in systems, which provide the light source for LCD panels in notebook computers, monitors, car navigation systems and televisions, as well as for general illumination applications. In addition, it offers alternating current (AC)/DC offline solutions for lighting illumination applications and AC/DC power conversion solutions for various end products that plug into a wall outlet.

Shareholders receive just 0.68% dividend. The $135 SunTrust price objective compares with the consensus target of $124.38. The shares ended last week at $120.07.

NVIDIA

This top chip stock has reported very strong earnings, and it was the top performing stock in the S&P 500 last year. NVIDIA Corp. (NASDAQ: NVDA) is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles.

NVIDIA is also moving into visual computing chips for cars, mobile devices and supercomputers. The company has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year.

Top Wall Street analysts feel the stock is maturing to a platform company from a pure chip company, and Jefferies sees the stock continuing to benefit from four secular trends: virtual reality, PC gaming, chips in the automobile industry and graphic processing units (GPUs) in the cloud.

The company posted gigantic third-quarter results that well exceeded Wall Street estimates, with much of the gains directly from the firm’s huge data center and AI business. Growth across all its platforms contributed to record revenue for the quarter, which was up 32% from a year earlier.

Investors are paid a small 0.28% dividend. SunTrust has set its price target at $250. The posted consensus target is just $211.63, but shares closed most recently at $215.40.

TTM Technologies

This stock could have very solid upside potential for 2018. TTM Technologies Inc. (NASDAQ: TTMI) is a manufacturer of printed circuit board (PCB) products and is focused on technologically advanced PCBs and electro-mechanical solutions. As of January 2, 2017, the company operated a total of 25 specialized facilities in North America and China, including 13 domestic PCB fabrication plants and a facility that provides follow-on value-added services primarily for one of the PCB fabrication plants.

All components of an electronic apparatus are mounted on its PCB, which provides electrical connections between the components (such as chips and resistors) using (mostly) copper traces and pads to which the components can be soldered. TTM Technologies offers a range of PCB products, including conventional PCBs, high-density interconnect PCBs, flexible PCBs, rigid-flex PCBs, custom assemblies and system integration and integrated circuits (IC) substrates.

The SunTrust price target is $20. The consensus target is in line at $20.25, and the stock closed on Friday at $16.32.

I'm interested in the Newsletter
 

The SunTrust concern for 2018 is warranted as valuations are very high, and the stocks as indicated by the numbers have had huge runs. Investors looking to buy positions may want to scale capital in over a wide period and hope that the market and the sector backs up some.