Technology

The Semiconductor Shortage Is Massive and Growing: 4 Stocks to Buy Now

Microchip’s sales, margins and earnings per share are somewhat more levered to the cyclical stabilization and recovery that is now upon us than many peers, owing to its relatively more vertically integrated manufacturing network, significant channel inventory reduction over the past seven quarters and elevated financial leverage.

Investors receive a 1.19% dividend. The $194 Jefferies price target compares with a $171.14 consensus price objective. Microchip Technology stock closed on Wednesday at $156.32 a share.

Nvidia

This top chip company has reported strong earnings the past few years, and the stock was absolutely hammered last quarter but had rallied back smartly. Nvidia Corp. (NASDAQ: NVDA) is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles.

Nvidia is also moving into visual computing chips for cars, mobile devices and supercomputers. The company has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year.

The analyst feels that the company deserves a higher multiple, as Nvidia is on a roadmap to grow its per-share earnings by an impressive compounded annual growth rate of around 37% over the next five years. This is as it builds its ecosystem, starting with chips, switch fabrics, software and artificial intelligence computing systems. The analyst cites downside risks that include demand destruction due to a prolonged outbreak of COVID-19 virus, slower PC gaming growth and competition from competitors and new entrants to the deep learning market.

Investors receive just a 0.28% dividend. Jefferies has set its price target at $680. The consensus target price is $655.52, and Nvidia stock closed most recently at $611.08 per share.


Needless to say, the increased demand and diminished product availability will be great for some companies, but it could put some intense pressure on the companies needing the semiconductors. Some have even indicated there could be factory closings as a result. Buying any of these four solid stocks very well could be a great short-term and long-term strategy for aggressive growth investors.