While last year was a difficult one for the semiconductor industry, this year’s bullish outlook for the market is buoyed by continual consumer demand, technological progress, and heightened investments. So, investors could consider buying robust chip stocks QUALCOMM Incorporated (QCOM) and Everspin Technologies, Inc. (MRAM). However, avoiding Indie Semiconductor, Inc. (INDI) could be ideal.
The semiconductor industry experienced a decline in 2023, with global sales decreasing 10.9% year-over-year to $534 billion. However, swift recovery is anticipated this year, driven by increasing demand for AI, high-performance computing, smartphones, and automotive applications, coupled with rising prices and the shift to advanced processes in the industry.
According to the latest forecast by Gartner, Inc. (G), global semiconductor revenue is expected to increase by 16.8% in 2024, reaching a total of $624 billion.
Moreover, demand for chips remains robust, propelled by factors including the burgeoning consumer electronics sector, technological innovations, increased investments, and growing automotive industry requirements. The global semiconductor market is expected to reach $1.21 trillion by 2029, expanding at a CAGR of 10.9%.
Furthermore, the worldwide semiconductor manufacturing equipment market is poised for expansion, propelled by the need for compact devices, increased adoption of electronic products, and advancements in cloud computing and 5G technology. The global semiconductor manufacturing equipment market is expected to expand at a CAGR of 7.9% until 2030.
In light of these encouraging trends, let's look at the fundamentals of the three best Semiconductor & Wireless Chip stocks.
Stocks to Buy:
QUALCOMM Incorporated (QCOM)
QCOM engages in the development and commercialization of foundational technologies for the wireless industry worldwide. It operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
QCOM’s trailing-12-month net income margin of 21.39% is 765.1% higher than the industry average of 2.47%. Its 37.63% trailing-12-month ROCE is significantly higher than the 2.42% industry average.
On January 19, QCOM declared a quarterly cash dividend of $0.80 per common share, payable on March 21, 2024. The company pays an annual dividend of $3.20, which yields 2.04% on the current market price. The company boasts a 20-year record of consistently raising its dividend payments.
QCOM’s total revenues for the fiscal first quarter that ended on December 24, 2023, amounted to $9.94 billion, up 5% year-over-year. The company’s net income and EPS rose 23.7% and 24.2% year-over-year to $2.77 billion and $2.46, respectively. Its operating income increased 18.8% year-over-year to $2.93 billion.
Street expects QCOM’s EPS and revenue to rise 14.7% and 6.1% year-over-year to $9.67 and $38.03 billion in the fiscal year ending September 2024, respectively. It surpassed EPS and revenue estimates in three of four trailing quarters, which is notable.
The stock has gained 43.5% over the past six months to close the last trading session at $158.30.
QCOM’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
QCOM has a B grade for Momentum, Sentiment and Quality. It is ranked #3 in the 90-stock Semiconductor & Wireless Chip industry.
To see additional QCOM ratings for Value, Growth and Stability, click here.
Everspin Technologies, Inc. (MRAM)
MRAM manufactures and sells magnetoresistive random access memory (MRAM) products, including Toggle MRAM, spin-transfer torque MRAM, and tunnel magnetoresistance sensor products. The company serves original equipment, contract, and design manufacturers.
MRAM’s 12.27% trailing-12-month net income margin is 396.2% higher than the 2.47% industry average. Its trailing-12-month ROCE of 17.68% is 631.8% higher than the industry average of 1.29%.
In the third quarter that ended September 30, 2023, MRAM’s revenue increased 8% year-over-year to $16.47 million. Its adjusted EBITDA rose 18.7% from the year-ago value to $4.01 million. The company’s net income and comprehensive income grew 27.8% from the prior year’s quarter to $2.44 million, while net income per common share increased 22.2% from the year-ago value to $0.11.
MRAM’s EPS and revenue are likely to increase 43.9% and 1.3% year-over-year to $0.12 and $15.90 million for the fiscal fourth quarter that ended December 2024. It surpassed EPS and revenue estimates in all four trailing quarters.
MRAM’s shares have gained 34.5% over the past year to close the last trading session at $9.12.
It’s no surprise that MRAM has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
It has an A grade for Sentiment and a B for Value, Momentum, and Quality. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated MRAM for Growth and Stability. Get all MRAM ratings here.
Stock to Sell:
Indie Semiconductor, Inc. (INDI)
INDI provides automotive semiconductors and software solutions to Advanced Driver Assistance Systems (ADAS), autonomous vehicles, in-cabin user experience, and electrification applications. The company focuses on edge sensors that cover multiple modalities, including light detection and ranging, radar, ultrasound, and computer vision.
INDI’s trailing-12-month EBITDA margin of negative 39.08% compares to the 9.20% industry average. The stock’s trailing-12-month asset turnover ratio of 0.31x is 48.7% lower than the 0.61x industry average.
During the fourth quarter that ended December 31, 2022, INDI generated total revenues of $70.13 million. Its non-GAAP operating loss stood at $2.42 million. Moreover, the company reported a non-GAAP net loss of $2.60 million and $0.01 per share.
Analysts expect INDI to report a loss per share of $0.08 for the fiscal first quarter ending March 2024. The company’s loss per share is expected to come in at $0.18 for fiscal year 2024.
Over the past year, the stock has plummeted 40.2% to close its last trading session at $6.22. It has declined 13.5% over the past three months.
INDI’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
INDI has an F grade for Stability and Quality and a D for Sentiment. It is ranked #88 within the same industry.
In addition to the POWR Ratings highlighted above, one can see INDI’s ratings for Growth, Value and Momentum here.
What To Do Next?
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QCOM shares were trading at $156.20 per share on Wednesday afternoon, down $1.30 (-0.83%). Year-to-date, QCOM has gained 8.00%, versus a 6.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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