3 Buy-Rated Semiconductor Stocks to Own in 2021 – February 26, 2021
When it comes to investing, most people’s thoughts turn to tech stocks for good reason. The tech space has been on fire since the late spring and early summer of ’20. These are the high-flying, fairly risky, growth-oriented stocks that have the potential to turn everyday investors into millionaires.
In particular, savvy investors tend to key in on semiconductor stocks as these companies will prove fundamental to technological and societal progress in the decades ahead. The bottom line is every investor should have several semiconductor stocks in his or her portfolio.
Let’s take a look at three of the top semiconductor stocks worth an in-depth look as we segue through the first financial quarter of the new year: Applied Materials (AMAT), Lam Research Corporation (LRCX), and STMicroelectronics (STM).
(If you are interested in learning more about the semiconductor industry, then please check out our Semiconductor Industry Report).
Applied Materials (AMAT)
Based in beautiful Santa Clara, CA, AMAT is one of the top equipment makers for the fabrication of semiconductors as well as LCDs and even solar photovoltaic cells/modules. Nearly two-thirds of AMAT’s revenue stems from its semiconductor operations. About one-quarter of AMAT’s revenue stems from its Applied Global Services division and 12% stems from its Adjacent Markets segment.
AMAT has B grades in the Quality, Sentiment, and Momentum components of the POWR Ratings. Of the nearly 100 stocks in the Semiconductor & Wireless Chip industry, AMAT is ranked 24th.
The analysts have established an average price target of $132.83 for the stock, meaning it is likely to pop by more than 11%. The analysts’ high target for AMAT is $150 while the low target price is $72. AMAT has a surprisingly low forward P/E ratio of 23.48 considering it operates in the semiconductor space, a segment that typically trades at an egregiously high multiple of forward earnings.
Though AMAT is within $8 of its 52-week high, there is still room for the stock to move even higher. AMAT’s services division is growing at a 15% clip per quarter. If re-shoring continues, AMAT’s operations spread out across several countries will certainly prove more favorable than if those operations were centered in one country.
Lam Research Corporation (LRCX)
LRCX makes and markets semiconductor processing equipment that sets the stage for the creation of integrated circuits. Furthermore, LRCX is one of the top suppliers of equipment for businesses in the semiconductor industry.
LRCX has B grades in the Quality, Sentiment, and Momentum components of the POWR Ratings. Of the 98 stocks in the Semiconductor & Wireless Chip sector, LRCX ranks 48th.
LRCX has a forward P/E ratio of 24.12, meaning the stock might be slightly underpriced at its current trading level of $560. This is even though LRCX is within $50 of its 52-week high. LRCX components are used in 5G devices, meaning the company is well-positioned for growth across posterity.
STMicroelectronics (STM)
STM is a worldwide semiconductor company that designs, makes, and markets a slew of semiconductor integrated circuits and other components. STM has B grades in the Momentum, Value, and Sentiment components of the POWR Ratings.
Of the 98 stocks in the Semiconductor & Wireless Chip industry, STM is ranked 13th.
STM also has a reasonable forward P/E ratio of 23.01 even though the stock is only $3 away from its 52-week high of $43.02. The analysts have established a high target price of $47.60 for STM. Based on this expert analysis, STM’s upside potential is higher than one-quarter of the stocks within the large market cap category.
AMAT shares were trading at $115.32 per share on Friday morning, up to $1.39 (+1.22%). Year-to-date, AMAT has gained 33.88%, versus a 2.11% rise in the benchmark S&P 500 index during the same period.
Author: Patrick Ryan