Bitcoin has plunged 44.3% over the past three months, making it the worst performing cryptocurrency over this period. The most popular cryptocurrency is currently trading below its $39,539.50 and $36,292.27 respective 50-day and 200-day moving averages, which indicates a downtrend. An intensifying regulatory crackdown on cryptocurrencies, particularly in China and the U.K., will likely keep bitcoin prices under pressure in the near term.
However, the semiconductor industry is gearing up to be a major market mover over the long run given the widespread application of semiconductor chips in consumer electronics and electric vehicles (EVs). The U.S. Innovation and Competition Act authorized $110 billion to be spent over five years to aid research in semiconductors, artificial intelligence and other technology. U.S. lawmakers have also proposed an estimated $25 billion to boost domestic semiconductor production. These investments aim to make the U.S. semiconductor industry highly competitive in the global markets.
The strong demand and improving supply conditions should allow the chip industry to generate substantial growth over the long term. Thus, we think shares of established companies in this space, Intel Corporation (INTC), Broadcom Inc. (AVGO), Texas Instruments Incorporated (TXN), and Qualcomm Inc. (QCOM), are well-positioned to deliver sustainable returns this year and beyond.
Intel Corporation (INTC)
INTC is a well-established company in the semiconductor industry with a global market presence. It designs and manufactures essential technologies for the cloud, smart, and connected devices. The company’s segments are Data Center Group (DCG), Internet of Things Group (IOTG), Mobileye, Non-Volatile Memory Solutions Group (NSG) and Programmable Solutions Group (PSG).
On June 28, INTC showcased a series of new technologies and upgrades targeting high performance computing and artificial intelligence. These innovations should help INTC strengthen its market presence.
On June 24, INTC partnered with Microsoft Corp. (MSFT) to deliver an enhanced computing experience in forthcoming Windows 11 software. The Windows 11 launch should be highly beneficial to INTC, with more than three-fourths of Windows PCs powered by INTC processors.
INTC’s revenues from its ‘internet of things’ segment increased 13.5% year-over-year to $1.29 billion. Also, its revenues from its client computing group improved 8.5% from its year-ago value to $10.61 billion, while revenues from all other segments came in at $620 million, indicating an 839.4% rise year-over-year. Its operating income from the internet of things segment increased 8.5% year-over-year to $359 million.
Analysts expect INTC’s EPS to rise at a 5.4% rate per annum over the next five years. INTC has an impressive earnings surprise history also. It beat consensus EPS estimates in three of trailing four quarters. Shares of INTC have gained 12.4% year-to-date, and 8.4% over the past six months to close Friday’s trading session at $55.99.
It is no surprise that INTC has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The stock has grade A for Value, and a grade B for Quality. Among the 99 stocks in the B-rated Semiconductor & Wireless Chip industry, INTC is ranked #22.
To see additional INTC ratings for Growth, Sentiment, Stability, and Momentum, click here.
Broadcom Inc. (AVGO)
AVGO is a technology company that designs, develops and supplies semiconductor infrastructure software solutions. The company operates through two segments: Semiconductor Solutions and Infrastructure Software.
On June 15, AVGO introduced industry-first capabilities to Value Stream Management (VSM) in its ValueOps software portfolio. This is expected to be a big hit in the market, thereby allowing the company to strengthen its position in the industry.
On June 2, AVGO launched its self-adaptive, ML-based endpoint security solution that delivers superior protection with automated policy configuration and no end-user productivity loss. Given the rising demand for cybersecurity solutions, this software should be in high demand in the market, thereby boosting the company’s revenues substantially.
AVGO’s net revenues increased 15.1% year-over-year to $6.61 billion in its fiscal second quarter, ended May 2. Its operating income grew 157.8% from its year-ago value to $1.98 billion, while its net income improved 165.2% year-over-year to $1.49 billion over the period. The company’s EPS increased 182.1% year-over-year to $3.30.
A $7.22 billion consensus revenue estimate for its fiscal fourth quarter, ending October 31, 2021, indicates a 11.6% improvement from the same period last year. Analysts expect the company’s EPS to come in at $7.46 in the next quarter, indicating a 17.5% rise year-over-year. Moreover, AVGO surpassed the Street’s EPS estimates in each of the trailing four quarters. AVGO has gained 9.7% year-to-date, and 49.4% over the past year.
AVGO has an overall A rating, which equates to Strong Buy in our proprietary POWR rating system. AVGO has a B grade for Growth, Stability, Sentiment, and Quality. It is ranked #1 in the Semiconductor & Wireless Chip industry.
Beyond what we’ve stated above, we have also rated AVGO for Momentum and Value. Click here to view all AVGO ratings.
Recently the Reitmeister Total Return Portfolio (RTR) closed a winning trade in AVGO for a 25% gain. Learn more about the RTR service here.
Texas Instruments Incorporated (TXN)
TXN designs, manufactures, and sells semiconductors to electronics designers and manufacturers in the global market. The company operates in two segments: Analog and Embedded Processing.
TXN introduced a new high-performance microcontroller portfolio today that advances real-time control, networking and analytics applications at the edge. Amid the growing demand for industrial automation and intelligent analytics, this launch should be a major hit among engineers and application designers.
On June 30, TXT agreed to acquire Micron Technology’s 300-mm semiconductor factory. This should allow the company to strengthen its technological base and aid its long-term capacity expansion.
TXN’s revenue increased 29% year-over-year to $4.29 billion in its fiscal first quarter, ended March 31. Its operating profit stood at $1.94 billion, up 56% from the same period last year. Its net income grew 49% from its year-ago value to $1.75 billion. The company’s EPS increased 51% year-over-year to $1.87.
Analysts expect TXN’s revenues to increase 33.5% year-over-year to $4.58 billion in the current quarter, ending September 30, 2021. A $1.97 consensus EPS estimate for the current quarter indicates a 35.9% rise from the same period last year. TXN also surpassed the consensus EPS estimates in each of the trailing four quarters. Shares of TXN have gained 45.9% over the past year, and 15.9% year-to-date.
TXN has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. TXN has an A grade for Quality, and a B grade for Sentiment. It is ranked #29 in the Semiconductor & Wireless Chip industry.
Click here to see more of TXN’s component grades.
Qualcomm Inc. (QCOM)
QCOM develops and commercializes technologies and products that are used in wireless devices. QCOM engages in the development and expansion of technologies like fifth generation (5G). The company operates through three segments: QCT (Qualcomm CDMA Technologies) , QTL (Qualcomm Technology Licensing) and QSI (Qualcomm Strategic Initiatives).
On July 8, QCOM announced its new venture with the government of Peachtree Corners, Georgia, and Jacobs to test cellular vehicle-to-everything technology. This demonstrates QCOM’s capabilities in smart infrastructure development.
QCOM’s revenues increased 52% year-over-year to $7.94 billion in its fiscal second quarter, ended March 28. Its operating income grew 118.6% from its year-ago value to $2.17 billion, while its net income improved 276% year-over-year to $1.76 billion over the period. The company’s EPS has increased 273% year-over-year to $1.53.
A $8.48 billion consensus revenue estimate for its fiscal fourth quarter, ending September 30, 2021, indicates a 30.4% improvement from the same period last year. Analysts expect the company’s EPS to come in at $2.04 in the current quarter, representing a 40.7% rise year-over-year. QCOM surpassed the Street’s EPS estimates in each of the trailing four quarters. QCOM has gained 51.7% over the past year. The stock gained 2.3% intraday to close Friday’s trading session at $141.43.
QCOM has an overall B rating, which equates to Buy in our proprietary rating system. QCOM has a B grade for Growth, Value, Sentiment, and Quality. It is ranked #6 in the Semiconductor & Wireless Chip industry.
Beyond what we’ve stated above, we have also rated QCOM for Momentum and Stability. Click here to view all QCOM ratings.
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INTC shares were trading at $56.73 per share on Monday afternoon, up $0.74 (+1.32%). Year-to-date, INTC has gained 15.95%, versus a 17.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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