Just when investors were maybe becoming a touch nervous over the dizzying heights the semiconductor capital equipment industry has soared to over the past couple of years, a major player came in this week and absolutely shredded expectations. Comments provided by Lam Research Inc. (NASDAQ: LRCX) paved a smooth runway for the segment when it presented very positive commentary on wafer fab equipment spending for 2018. While the stock was surprisingly hammered, most feel that industry is poised for big growth.
In a new research report from Stifel, some of the comments from Lam Research even exceeded their own bullish perspective, and the report noted this:
While we have been bullish on WFE trends led by the memory sector and believe upside exists, Lam’s comments confirmed this view and if anything, provided more support that the upside is already being factored in by the equipment companies. From a big picture perspective, we believe Lam’s comments are positive for the group and can provide a more sustainable catalyst as we believe revenues and earnings can continue to grow over the next quarter or two.
The Stifel team is positive on numerous semiconductor capital equipment companies, and the following five may the best upside potential for investors.
This semiconductor capital equipment leader has one of the broadest ranges of exposure to 3D NAND and Foundry display, and it is also on the Stifel Select List. 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 analysts are very positive on the stock, and see Applied Materials benefiting not only the semiconductor side of the business but also from larger, higher resolution and flexible screens on the display side of the business. It may still be one of the best technology values available for investors today.
Many feel there are 5 top reasons to own the shares: semiconductor capital equipment strength, OLED, investments from China, valuation and $4 in earnings per share in two years.
Applied Materials investors are paid a 1.01% dividend. The Stifel price target for the stock is $70. The Wall Street consensus price target is $68.50, and the stock traded early Friday at $55.60 a share.
This small-cap company could offer large returns for aggressive investors. FormFactor Inc. (NASDAQ: FORM) helps semiconductor manufacturers test the integrated circuits (ICs) that power consumer mobile devices, as well as computing, automotive and other applications.
The company is one of the world’s leading providers of essential wafer test technologies and expertise, with an extensive portfolio of high-performance probe cards for DRAM, flash and system on chip devices. Customers use FormFactor’s products and services to lower overall production costs, improve their yields and enable complex next-generation ICs.
Last year the semiconductor probe card manufacturer made a bold bet by shelling out more than $350 million to acquire Cascade Microtech, one of its primary competitors. That move nearly doubled the size of its business and promised to make the company stronger than ever.
Stifel has a $21 price target for the stock, and the posted consensus target is $20.18. The shares were last seen trading at $15.05.