The semiconductor industry has grown markedly so far this year, thanks to immense federal and private investments amid continuing robust demand. Amid the current global chip shortage, which has been exacerbated by increased sanctions against Russia, semiconductor companies are ramping up production with the help of private and government investments and incentives. Last month, the European Commission passed a new European Chips Act to enable $17.11 billion in public and private investments through 2030. And last year, President Biden set aside $50 billion for semiconductor manufacturing and research.
The U.S.-based Semiconductor Industry Association (SIA) has reported that global semiconductor industry sales hit a record $555.90 billion in 2021, registering a 26.2% surge year-over-year. Global semiconductor sales totaled $50.70 billion in January 2022, up 26.8% year-over-year. The bullish sentiment surrounding the industry is evidenced by the iShares Semiconductor ETF (SOXX), which has gained 13.7% over the past year.
Given the backdrop, we think it could be wise to invest in the quality small-cap semiconductor stocks Camtek Ltd. (CAMT) and SMART Global Holdings, Inc. (SGH), which possess promising growth prospects.
Camtek Ltd. (CAMT)
CAMT develops, manufactures, and sells inspection and metrology equipment and provides software solutions. It is headquartered in Migdal HaEmek, Israel. The company serves primarily the advanced packaging, memory, complementary metal-oxide-semiconductor (CMOS), image sensors, radiofrequency, micromechanical sensors (MEMS), and other semiconductor industry segments. CAMT sells its products in Asia Pacific, the U.S., and Europe. It has a market capitalization of $1.43 billion.
Last month, CAMT received orders totaling approximately $20 million from two leading Tier-1 IDMs. The orders are for the Advanced Interconnect Packaging, which is the company’s current growth driver. The Advanced Interconnect Packaging market is expected to grow with complex packaging technologies, such as Heterogeneous Integration, which supports the most challenging applications. This reflects CAMT’s business growth and profitability.
In its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, CAMT’s revenue increased 52.7% year-over-year to $74.20 million. Its gross profit grew 61.5% year-over-year to $37.76 million. The company’s operating income grew 127.2% year-over-year to $20.93 million, and its net income increased 123.9% from the prior-year period to $19.68 million. CAMT’s net income per share rose 104.8% from its year-ago value to $0.43.
The $75.60 million consensus revenue estimate for its fiscal year 2022 first quarter, ending March 31, 2022, represents 31.8% year-over-year growth. The $0.43 consensus EPS estimate for the current quarter indicates a 29.6% year-over-year rise from the prior-year period. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
Shares of CAMT increased 8.4% in price over the past year and closed yesterday’s trading session at $31.94.
CAMT’s POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
CAMT has a grade of B for Sentiment, Momentum, and Quality. Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #54 of 97 stocks.
To see additional POWR Ratings (Stability, Growth, and Value) for CAMT, click here.
SMART Global Holdings, Inc. (SGH)
SGH designs, manufactures, and distributes specialty solutions for the computing, memory, and LED markets in the U.S., Brazil, China, Europe, and internationally. The Cayman Islands company operates through three segments: Memory Solutions; Intelligent Platforms Solutions; and LED Solutions. It offers dynamic RAM modules, supply chain services, Penguin Computing solutions, Penguin Edge solutions, LED solutions, hardware, and software products. SGH has a market capitalization of $1.30 billion.
On Feb. 16, 2022, SGH introduced its new DDR5 32GB Very Low Profile Registered Dual In-Line Memory Module (VLP RDIMM). This is the newest addition to SGH’s broad portfolio of VLP and ULP modules and might boost the company’s revenue streams.
On Jan. 25, 2022, Penguin Computing, Inc., a division of SGH, partnered with Meta to help build the Metaverse by providing the managed services and AI-optimized infrastructure for the RSC. This development is expected to expand SGH’s customer reach and boost its revenues.
SGH’s net sales increased 61.1% year-over-year to $469.90 million in its fiscal 2022 first quarter, ended Nov. 26, 2021. Its gross profit improved 134.8% year-over-year to $127.03 million. SGH’s operating income increased 192% year-over-year to $69.15 million. Its net income attributable to SGH grew 187.2% year-over-year to $56.31 million, and the company’s earnings per share rose 176.9% year-over-year to $2.16.
Analysts expect SGH’s revenue for its fiscal 2022 second quarter, ended February 28, 2022, to come in at $435.01 million, representing a 43.1% rise year-over-year. The Street expects the company’s EPS for the to-be-reported quarter to come in at $0.72, representing a 66.4% increase year-over-year. SGH has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
SGH shares have increased 14.8% in price over the past year and 7.7% over the past six months. The stock closed yesterday’s trading session at $26.32.
SGH’s POWR Ratings reflect this strong outlook. It has an overall rating of B, which translates to Buy in our POWR Ratings system.
SGH has a grade of A for Growth and a B grade for Value. It is ranked #43 of 97 stocks in the A-rated Semiconductor & Wireless Chip industry.
Click here to see SGH ratings for Quality, Stability, Momentum, and Sentiment.
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CAMT shares were trading at $31.58 per share on Wednesday afternoon, down $0.36 (-1.13%). Year-to-date, CAMT has declined -31.41%, versus a -6.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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