Investing

BofA Sees Big Upside in Semiconductor Stocks, Upgrades 2 Chip Design Picks

Taiwan Semiconductor recently certified Synopsys digital and custom design flows for TSMC’s 3- and 4-nanometer process technologies.

Synopsys stock traded up about 1%, at around $306.75, just before noon Wednesday. The 52-week range is $255.02 to $377.60. At BofA’s price target, the upside potential is around 17.4%.

In the same research note, the BofA analysts downgraded four chipmakers: Teradyne Inc. (NASDAQ: TER) was downgraded from Buy to Neutral, as was Texas Instruments Inc. (NASDAQ: TXN). Qorvo Inc. (NASDAQ: QRVO) and Skyworks Solutions Inc. (NASDAQ: SWKS) were downgraded from Neutral to Underperform.

The Texas Instruments price objective was cut from $190 to $175, and Teradyne’s was cut from $140 to $110. Qorvo’s $125 price objective was lowered to $95, and Skyworks’ was cut from $130 to $105.

Teradyne makes and sells automated test equipment for a variety of industries, including chipmakers, and its largest customer is Apple. BofA’s analysts remain cautious on the stock due to expected slowdowns in chip sales growth.

Texas Instruments makes a variety of semiconductors and is a premier maker of analog chips. According to BofA, “near-term capex commitments could slow free cash flow growth, limiting [free cash flow] upside.”

Qorvo designs and makes semiconductors for wireless (RF) and wired connectivity products. BofA notes that the company “is benefitting from increasing complexity and content in next-generation connected mobile devices such as smartphones and tablets,” but the maturing conversion to 5G handsets and “supply/demand headwinds” may limit Qorvo’s upside.

Skyworks holds “dominant market share in the low-band and emerging broad markets [and internet of things] opportunities,” but the analysts note limited gross margin leverage, the maturing 5G handset business and difficult comparables as current concerns.

Teradyne stock traded down about 6.7% at around $88.90 on Wednesday, in a 52-week range of $85.66 to $168.91. At BofA’s price target, the upside potential is around 23.4%.

Texas Instruments stock traded down about 0.8%, at around $152.90, just before noon Wednesday. The 52-week range is $149.10 to $202.26. At BofA’s price target, the upside potential is around 14.5%.

Qorvo shares traded down about 2.5% to around $96.10 late Wednesday morning, in a 52-week range of $91.91 to $201.46. The stock is currently trading above BofA’s price target of $95.

Skyworks stock traded down about 2.3%, at around $94.00, just before noon Wednesday, in a 52-week range of $88.76 to $197.62 At BofA’s price target, the upside potential is around 11.7%.

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