The COVID-19 pandemic led to an unprecedented increase in the demand for semiconductor products, resulting in global supply chain disruptions. Despite hefty support from the government, only 12% of semiconductors are manufactured in the United States, and it is estimated that the number will go down to less than 10% by 2030 if investments in this sector are not initiated.

Moreover, due to the worsening economic outlook, the semiconductor industry is expected to register a 7.4% slump in global revenue this year compared to a 26.3% growth in 2021. A decline in consumer spending because of rising inflation and interest rate hikes have severely impacted the purchasing pattern for products like PCs and smartphones.

Furthermore, export restrictions imposed by the BIS to limit the use of America’s cutting-edge chips and technology by Chinese companies are also creating adverse effects on the US semiconductor industry.

Given this backdrop, it could be wise to avoid fundamentally weak semiconductor stocks Advanced Micro Devices, Inc. (AMD) and Marvell Technology, Inc. (MRVL).

Advanced Micro Devices, Inc. (AMD)

AMD is a global semiconductor company. It operates through two segments Computing and Graphics; and Enterprise, Embedded, and Semi-Custom. The Computing and Graphics segment includes desktop and notebook microprocessors, accelerated processing units, chipsets, GPUs, data centers, etc.

The Enterprise, Embedded, and Semi-Custom segment includes server and embedded processors, semi-custom system-on-chip (SoC) products, etc.

AMD’s operating income declined 36.7% year-over-year to $526 million for the second quarter that ended June 25, 2022. Its net income reduced 37% year-over-year to $447 million, while its EPS came in at $0.27, down 53.4% year-over-year.

Analysts expect AMD’s EPS for the quarter ending March 2023 to decline 16.8% year-over-year to $0.94.

In terms of its forward EV/Sales, AMD is currently trading at 4.09x, 58.5% higher than the industry average of 2.58x. Its forward Price/Sales multiple of 4.20 is 60.1% higher than the industry average of 2.62.

The stock has declined 52.9% year-to-date and 34.5% over the past year to close the last trading session at $67.85.

AMD’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, which translates to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It also has a D grade for Stability. It is ranked #83 out of 92 stocks in the Semiconductor & Wireless Chip industry.

Click here to see the other ratings of AMD for Growth, Value, Momentum, Sentiment, and Quality.

Marvell Technology, Inc. (MRVL)

MRVL is engaged in designing, developing, and selling integrated circuits and other infrastructure semiconductor solutions. The company’s offerings cater to five markets- data center, carrier infrastructure, enterprise networking, consumer, and automotive/industrial.

MRVL’s operating expenses increased 17% year-over-year to $746.90 million for the fiscal second quarter ended July 30, 2022. The company’s total liabilities stood at $6.63 billion, compared to $6.41 billion for the fiscal year ended January 29, 2022. Its current liabilities increased 55.2% to $2.15 billion, compared to $1.38 billion for the fiscal year ended January 29, 2022.

MRVL’s forward P/E multiple of 523.66 is 2,438% higher than the industry average of 20.63. In terms of its forward EV/Sales, the stock is trading at 7.18x, 178.5% higher than the industry average of 2.58x.

The stock has lost 45.2% year-to-date and 24.8% over the past year to close the last trading session at $47.96.

MRVL’s POWR Ratings reflect weak prospects. The stock has an overall rating of D, which equates to a Sell in our proprietary rating system.

It also has a D grade for Value, Stability, and Quality. Within the same industry, it is ranked #81.

To see the other ratings of MRVL for Growth, Momentum, and Sentiment, click here.

AMD shares were trading at $60.44 per share on Friday afternoon, down $7.41 (-10.92%). Year-to-date, AMD has declined -58.00%, versus a -22.46% rise in the benchmark S&P 500 index during the same period.

About the Author: Komal Bhattar

Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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