Technology

Despite Recent Volatility, RBC Still Very Bullish on 4 Semiconductor Stocks

Lee Jackson

Cadence Design recently released the ConnX B20 DSP, which provides a faster and more power-efficient solution for the automotive and 5G communications markets, including next-generation radar, lidar, vehicle-to-everything (V2X), user equipment (UE)/infrastructure and Internet of Things applications.

The RBC price target for the shares is $80, while the consensus price objective is lower at $74.34. The stock closed trading at $69.69 per share on Wednesday.

Nvidia

This sector leader made a huge purchase in the spring. Nvidia Corp. (NASDAQ: NVDA), a company that rarely has grown through acquisitions, bought Mellanox and paid $6.9 billion in cash. In what actually was somewhat of a duel, Nvidia knocked out Intel in its bid to buy the chipmaker, and the deal will help Nvidia boost its business of making data center chips that help power cloud computing.

Mellanox’s BlueField intelligent network adapters are another version of data center co-processing acceleration. Top Wall Street analysts see the combination of Nvidia and Mellanox as a definite threat to Intel’s data center CPU dominance of workloads. This indirect competition could ultimately be a problem for Intel shareholders.

The company had another big announcement recently, and the RBC report noted this:

Nvidia announced that Minecraft will now support raytracing with the introduction of real-time DXR raytracing for Windows 10. Minecraft is being refitted with path tracing that allows for life-like lighting, reflections, and shadows. Overall, the announcement is a notable positive for the future of the RTX platform, as one of the bear-thesis items surrounding raytracing was the lack of titles. The addition of Minecraft (one of the most popular games) should help quell fears surrounding adoption from other high-quality titles in the future.

The $190 RBC price target compares with the posted consensus target last seen at $182.72. The shares closed most recently at $171.23.

Synopsys

This semiconductor design stock is another Wall Street favorite and the top pick for 2019 at RBC. Synopsys Inc. (NASDAQ: SNPS) is the largest provider of electronic design automation (EDA) software used to design, verify and layout semiconductor chips and electrical systems.

Synopsys represents roughly 28% of the $5 billion EDA market and is the market leader in digital synthesis (Galaxy product) as well as the largest EDA provider of intellectual property for common interconnects like USB. Synopsys continues making inroads into the analog space with the launch of its Galaxy Designer product.

RBC sees the company a winner as research and development spending continues to surge in 2019. With Synopsis a big player in the EDA market, this looks to be a strong tailwind for the company.

RBC has set a whopping $145 price target. The consensus target is just $133.66, and the shares closed most recently at $131.84.

Even if the bottom of the cycle isn’t 100% in, it should be close, and these four companies have done very well regardless. The RBC team is sticking with companies that they have followed and remained positive on for years, and all are solid picks for aggressive growth accounts.