Deutsche Bank Extremely Cautious on Semiconductors: 5 Top 2019 Picks

Marvell Technology

This is one of the favored mid-cap picks at Deutsche Bank for 2019. 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.

Top analysts around Wall Street are very positive on the company’s purchase of Cavium, and many feel the deal adds significantly to the growth element for the stock. The addition also helps make Marvell solidly positioned in data center, cloud, enterprise, security and 5G, all the silos Deutsche Bank remains positive on.

Shareholders receive a 1.45% dividend. The $22 Deutsche Bank price target is less than the $23.83 consensus price objective. Shares closed on Thursday at $16.52.

NXP Semiconductors

This is still considered a top play for investors looking for a chip stock with Internet of Things exposure, and it is another top mid-cap play at Deutsche Bank. The NXP Semiconductors N.V. (NASDAQ: NXPI) merger with Freescale Semiconductor made it the fourth largest semiconductor company in the industry. It is also important to note that the combined company is the number one supplier in auto semiconductors with a 14% share, number one supplier in global microcontrollers and a dominant supplier in mobile payments.

NXP continues getting its chips into high-growth areas such as contactless mobile payments, the Internet of Things, mobile-phone charging, increased cellular data consumption and LED lighting. Trading at a solid discount to peers, analysts are very positive on the faster earnings growth potential relative to its competition.

Investors receive a 1.26% dividend. Deutsche Bank has set its price target at $105. The consensus target is $100.25, and the stock closed most recently at $79.14.

Monolithic Power Systems

This off-the-radar play is the top small-cap pick at Deutsche Bank. 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.

The company offers direct current (DC) to DC converter integrated circuits 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.

It also provides lighting control integrated circuits 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 a 1.0% dividend. The Deutsche Bank price objective is $135. The consensus target price is $149.13, and shares were last seen at $122.60.

Given the overall caution Deutsche Bank has on the industry, it may make sense to buy partial positions here and see how investors respond to fourth-quarter results. In addition, numerous external factors are adding volatility to the market, so that should be factored in as well.

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