If any industry was on fire for the past few years it was the semiconductors, and with good reason. Semiconductor use in various products from gaming to automobiles to bitcoin mining has exploded. And now, there is actually a shortage that many in the industry believe will last until next year. The good news for aggressive growth investors eyeing the industry is that, despite the strong price action this summer, the massive demand from the shortage doesn’t look to be rectified for some time.
In a new Jefferies research piece from top-notch chip analyst Mark Lipacis, he and his team turned to supply-chain experts looking for answers. They said this about the current semiconductor landscape:
We were out with our key takeaways from a call we hosted with a supply-chain expert post 10 days of checks. We pointed out that component suppliers have noted “record-high levels” of bookings and billings in the second quarter of 2021 with robust demand across all vertical markets. Additionally, we noted that we are not seeing any typical “cycle-peak signals” such as order cancellations, push-outs, or sudden improvements in lead times. Moreover, we pointed out that the supply chain players do not expect normalization until the second quarter of 2022, particularly as the new IC fabs come online and start commercial production.
Four of the industry’s best companies are the top semiconductor picks at Jefferies, and aggressive growth investors looking for an alpha upside boost for the rest of the summer should consider positions. It is important to remember though that no single analyst report should be used as a sole basis for any buying or selling decision.
This stock could very well continue to benefit from the increase in information technology and 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.
The company offers signal-processing products that convert, condition and process real-world phenomena, such as temperature, pressure, sound, light, speed and motion, into electrical signals.
Analog Devices 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.
Analog Devices stock investors receive a 1.55% dividend. The Jefferies price target for the shares is $188, and the Wall Street consensus target is $185.82. The shares closed on Friday at $160.44 a share.