While the tech industry performed exceptionally over the past year, the mega-cap tech giants reaped the majority of benefits. However, the unprecedented gains of industry leaders such as Amazon.com, Inc. (AMZN) and Facebook, Inc. (FB) has led to overvaluations and caught the attention of regulators across the world. It will likely lead to multiple antitrust and monopolistic practices allegations against these companies. Therefore, some lesser-known tech companies have better prospects in 2021.
While many expect the tech industry to underperform in a post-pandemic economy, they will continue to play an essential role in our lives and remain crucial to business operations. Of course, we still have to deal with the pandemic which necessitates a reliance on these companies.
Companies such as Cirrus Logic, Inc. (CRUS) and Vishay Intertechnology, Inc. (VSH) share the same positive attributes as many of the 2020 winners. However, they have less risk in terms of valuation and regulations.
Cirrus Logic, Inc. (CRUS)
CRUS manufactures fabless semiconductors using mixed-signal integrated circuits and analog to digital converters. The company’s product pipeline can be categorized into three segments – Portable Audio, Non-Portable Audio, and Other. It has an Institutional Shareholder Service (ISS) Governance Quality Score of 1, indicating a relatively low governance risk.
CRUS’ revenue has declined 10.7% year-over-year to $347.33 million in the fiscal second quarter ended September 26, 2020. Net income has fallen 21.9% from the same period last year to $59.49 million, while EPS declined 22% from the year-ago value to $0.99.
While the poor financial performance in the last reported quarter can be attributed to the global economic slump, the company has been taking active efforts to boost its business this year, thereby preparing it to become more competitive in a post-pandemic world. To this end, CRUS undertook several changes at the executive and director level. The company unanimously elected John Forsyth as the new CEO this year, who has over 20 years of experience in this domain.
The consensus EPS estimate of $4.33 for the fiscal year 2021 indicates an 8.5% improvement year-over-year. The company has an impressive earnings surprise history as well, as it beat the Street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $1.35 billion indicates a 5.2% rise from the same period last year.
CRUS declined 1.8% over the past year. However, the stock gained 35.5% over the past six months and has plenty of upsides left. Analysts expect CRUS to gain 6.6% to hit $87.63 soon.
How does CRUS stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Industry Rank
B for Overall POWR Rating.
In the 88-stock Semiconductor & Wireless Chip industry, CRUS is currently ranked #54.
Vishay Intertechnology, Inc. (VSH)
VSH produces and sells discrete semiconductors and passive components across the world. Its product pipeline comprises MOSFETs, Diodes, Optoelectronic Components, Resistors & Inductors, and Capacitors. The company’s semiconductor components have applications in power management, signal routing, data transfer, and remote control and circuit isolation designs.
As the semiconductor and ancillary industries faced the brunt of the pandemic, VSH’s revenue and earnings declined steeply in the initial quarters of 2020. In this regard, analysts expect the company’s EPS to decline 28.6% year-over-year, and revenue to decline 7.1% year-over-year, in fiscal 2020.
However, the company regained momentum from the third quarter, owing to strategic product launches and expansion plans. The company launched a state-of-the-art silicon PIN photodiode in December, as well as upgraded its MOSEFET N-channel devices for improved efficiency over this period.
VSH was awarded the 2020 China Internet-of-Things (IoT) innovation award and BETA Award last month, marking its strong foothold in this industry.
VSH’s net revenues have increased slightly year-over-year to $640.16 million in the third quarter ended October 3, 2020. Its net earnings have risen 11.2% from the same period last year to $33.66 million, while EPS grew 9.5% from the year-ago value to $0.23.
The consensus EPS estimate of $1.31 for fiscal 2021 indicates a 45.6% improvement year-over-year. The company has an impressive earnings surprise history as well, as it beat the Street EPS estimates in three out of the trailing four quarters. The consensus revenue estimate of $2.72 billion for fiscal 2021 indicates a 9.6% growth from the same period last year.
VSH lost 2.2% over the past year but gained 39.3% over the past six months. Moreover, the stock gained more than 80% since hitting its 52-week low of $11.23 in March. Out of 7 Wall Street Analysts that rated the stock, 2 rated it “Strong Buy”, reflecting the growth potential of the company in the backdrop of a recovering economy.
It’s no surprise that VSH is rated “Buy” with an “A” for Trade Grade, and a “B” for Buy & Hold Grade and Industry Rank. It is currently ranked #56 in the same industry.
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CRUS shares were trading at $83.43 per share on Monday afternoon, up $1.23 (+1.50%). Year-to-date, CRUS has gained 1.50%, versus a -1.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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