Semiconductors Have Lagged the Market: 4 Stocks to Buy Right Now


While actually a hybrid semiconductor capital equipment/test leader, this company guided 30% ahead of expectations and saw selling. Teradyne Inc. (NYSE: TER) is a supplier of automation equipment for test and industrial applications.

The company designs automatic test systems used to test semiconductors, wireless products, data storage and electronic systems in the consumer, wireless, auto, industrial, computing, communications and aerospace/defense markets. Industrial automation products include collaborative robots used by global manufacturing and light industrial customers to improve manufacturing efficiency and reduce costs.

Many analysts on Wall Street point to the company as a somewhat ancillary play to the sector and have often cited the growing robotics silo as more of a reason to own the shares than the fundamentals related to wafer fab equipment. The company also has consistently bought back stock, a huge positive for shareholders.

The analyst said this after the company reported:

Solid beat and raise with sustainable long-term demand; now see sales/EPS compounded annual growth rate of 11%/14% and long-term EPS of $9; Reiterate Buy and raise price objective. Like: Semiconductor test stocks on total addressable market +17% to $5.2billion; Apple likely flat to slightly down in 2021 versus -40%+ expected; solid free-cash-flow/returns. Risks: memory share down in 2021; 10%/40% test growth in 2020 and 2021 well above long term 4-8% creates tough comparisons; supply very tight.

BofA Securities lifted its $150 price target to $155, well above the $137.85 consensus target. Teradyne stock closed at $125.08 on Friday.

Texas Instruments

This old-school semiconductor maker also trounced estimates, but disappointing guidance brought in the sellers. Texas Instruments Inc. (NASDAQ: TXN) is a broad-based supplier of semiconductor components, ranging from digital signal processors to high-performance analog components, to digital light-processing technology and calculators.

Some 65% of the company’s sales are exposed to the well-diversified, business-to-business industrial, automotive, communications infrastructure and enterprise markets. The company is a big Apple supplier, so the long-term outlook for this venerable leader makes it a safer bet for investors with less risk tolerance.

The stock was crushed after the solid first-quarter results, as guidance surprised Wall Street. The pullback in the share price is offering long-term investors the best entry point in some time.