Semiconductor investors have led a charmed life over the past five years. The Philadelphia Semiconductor Index (SOX) has tripled since 2015, from 566 to the current 1,883 Tuesday close. Investors that had the courage to shake off the huge decline earlier this year also have been well rewarded, as the index is up a stunning 50% from the March lows.
While this sort of rally is usually one that ends with a blow-off top and a big pullback, the analysts at BofA Securities remain positive. In a series of new reports, while they concede that the overhang from the issues with China remain, they cite the cloud, 5G, electric vehicles, automation and reshoring as positive tailwinds that can move the sector still higher.
Four large-cap leaders stand out and remain analyst favorites at BofA Securities. All are rated Buy and remain good long-term holdings for more aggressive growth accounts.
Advanced Micro Devices
This remains one of the best turnaround stories in technology history, and it is a top cloud pick. Advanced Micro Devices Inc. (NYSE: AMD) 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.
AMD’s products include x86 microprocessors as an accelerated processing unit, chipsets, discrete and integrated graphics processing units (GPUs), data center and professional GPUs and development services, as well as server and embedded processors, and semi-custom System-on-Chip (SoC) products, development services and technology for game consoles.
The company also provides embedded processor solutions for interactive digital signage, casino gaming and medical imaging under the AMD Opteron, AMD Athlon, AMD Geode, AMD Ryzen, AMD EPYC, AMD R-Series and G-Series processors brands; customer-specific solutions based on AMD CPU, GPU, and multimedia technologies; and semi-custom SoC products. It serves original equipment and design manufacturers, data centers, original design manufacturers, system integrators, independent distributors, online retailers and add-in-board manufacturers through its direct sales force, independent distributors and sales representatives.
The BofA Securities price objective for the shares is $65, while the Wall Street consensus price target is $53.89. Advanced Micro Devices stock closed trading on Tuesday just above the consensus level at $54.54.
Analog Devices
This stock could very well continue to benefit from an increase in information technology and upcoming 5G spending. Analog Devices Inc. (NASDAQ: ADI) is a leader in the design, manufacture and marketing of analog, mixed-signal and digital signal-processing integrated circuits for use in industrial, automotive, consumer and communication markets worldwide. It offers signal-processing products that convert, condition and process real-world phenomena, such as temperature, pressure, sound, light, speed and motion, into electrical signals.
The company has among the best end-market exposure, with high communications and aerospace/defense market exposure, in addition to offering investors a powerful 5G content growth story. Plus, acquisitions over the past few years like Linear Technology and Hittite Microwave should provide revenue and additional cost synergies that are still coming.
Investors receive a 2.12% dividend. BofA Securities has a $135 price target, which is above the consensus price target of $125.32. Analog Devices stock closed Tuesday at $116.80, up almost 4% on the day.
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