Back and forth, up 500 points, down 500 points, and the kind of whipsaw market that really could be setting us up for more downside pain. That said, a lot of the volatility has been driven by the short volatility exchange traded funds, which have been mauled, and the VIX has traded almost like a market crash happened, not a correction. One thing’s for sure, the direction for the next week is still anybody’s guess, and we could go either way.
With that in mind, if things settle down, and money does flow back in, as we did hit an intraday correction level, there could be some great opportunity, especially for aggressive accounts looking to take some trading shots.
We screened the Merrill Lynch research university for semiconductor stocks rated Buy that could have some big upside if the market does take off, and probably not horrible downside should we back up again.
Advanced Micro Devices
After years of frustrating performance, Advanced Micro Devices Inc. (NYSE: AMD) appears to have turned the corner and is a hot commodity on Wall Street. It is one of the largest suppliers of PC microprocessors and graphics processors worldwide to computing original equipment manufacturers. The company’s main product lines include desktop, notebook and graphics processors, and embedded/semi-custom chips.
Last year the company released its first major offering in five years, the Ryzen chipset, which many feel is uniquely positioned to compete with the big players like Intel and NVIDIA in the $50 billion total addressable market for personal computers, gaming, artificial intelligence and servers.
The company posted solid results, and the analysts said this at the time:
Beat and solid raise, we see 20%+ growth trajectory with accretive products even without crypto benefit. Server inflection is here with chance to ramp share from nothing to 5% in $20bn total addressable market. Raise estimates, reiterate Buy and a top Small/Midcap pick for 2018.
The Merrill Lynch price target for the stock is $18, and the Wall Street consensus target is $14.86. Shares closed Tuesday at $11.65.
This stock traded in a tight range from March until last month, but it got hit hard on earnings. Cypress Semiconductor Corp. (NASDAQ: CY) manufactures and sells embedded system solutions for the automotive, industrial, home automation and appliances, consumer electronics and medical markets.
Its product portfolio includes programmable-systems-on-chip (PSoC), general purpose microcontrollers, analog integrated circuits, USB controllers, connectivity chips (Bluetooth, Wi-Fi, Zigbee) and memory chips.
Shareholders receive a 2.66% dividend. Merrill Lynch has a $22 price objective, and the consensus price target is $20.15. Shares closed Tuesday at $16.52.
This company has made a bold $6 billion bid to buy Cavium. Marvell Technology Group Ltd. (NASDAQ: MRVL) is a fabless supplier of mixed signal and analog semiconductor products to a number of storage, computing and communication applications, including hard disk drives, personal computers, servers, Ethernet switches, printers and connectivity markets.
The Merrill Lynch team is very positive on the company’s purchase of Cavium, and they feel the deal adds significantly to the growth element for the stock. The addition helps to make Marvell solidly positioned in data center, cloud, enterprise, security and 5G.
Shareholders receive a 1.11% dividend. The $28 Merrill Lynch price objective compares with the consensus target of $27.26. Shares closed Tuesday at $21.70.
Aggressive accounts may want to look at this smaller cap play. ON Semiconductor Corp. (NASDAQ: ON) is a vendor of analog power management, analog signal conditioning, standard logic integrated circuits and discrete chips into the automotive, communications, computing, consumer, industrial and medical applications. The company is in the midst of a transformation from a seller of commodity discrete chips into higher value added analog integrated circuits, both through organic growth and acquisitions.
The analysts view this stock as an underappreciated way for investors to benefit from the emergence of advanced driver assistance systems and eventually autonomous driving. While the company is inherently levered (operationally and financially) and therefore subject to investor fears of cyclical volatility, many continue to see structural upside for the shares.
Merrill Lynch has set its price target at $30. The consensus target is $25.10, and shares closed Tuesday at $22.68.
All these smaller capitalization companies got caught in the selling blitzkrieg, but they offer good trading possibilities if the market decides to really take off again. The good thing is they have been hit down already, so getting moved drastically lower looks unlikely. Again though, these stocks are for aggressive accounts with a large degree of risk tolerance.