3 Chip Stocks to Watch for June Surge

NASDAQ: KLAC | KLA Corp. News, Ratings, and Charts

KLAC – The chip sector is expected to demonstrate strength, owing to soaring demand for chips across different sectors and rapid technological advancements. Therefore, investors could look to add fundamentally strong chip stocks KLA (KLAC), STMicroelectronics (STM), and ASE Technology (ASX) to their watchlist. Read on…

The chip industry is anticipated to thrive in today’s tech-driven era amid lucrative government support and continuous technological advancements, leading to advanced chips that cater to various requirements.

Amid this backdrop, investors could consider adding chip stocks KLA Corporation (KLAC), STMicroelectronics N.V. (STM), and ASE Technology Holding Co., Ltd. (ASX) to their watchlist. Before exploring the fundamentals of these stocks, let’s first understand what’s shaping the chip industry’s prospects.

The global semiconductor industry is witnessing a surge in demand, given the rise of artificial intelligence (AI) and high-performance computing (HPC). These advanced technologies need greater processing power to work efficiently, so companies are developing cutting-edge chips.

Moreover, the proliferation of smartphones, computers, and data centers is also spurring demand for chips. The worldwide sales of semiconductors amounted to $137.70 billion in the first quarter of 2024, representing a 15.2% increase year-over-year.

Expansions in cutting-edge logic and foundry capacity, generative AI and high-performance computing (HPC) applications, and resurgent end-demand for chips expand the opportunity window for further expansion in the chip industry. The global capital expenditure in the semiconductor industry is anticipated to hit $2.30 trillion by 2032.

The global semiconductor market will reach $2.06 trillion by 2032, growing at a 14.9% CAGR.

With these favorable trends in mind, let’s delve into the fundamentals of the three Semiconductor & Wireless Chips stocks, starting with the one ranked lower in our proprietary rating system.

Stock #3: KLA Corporation (KLAC)

KLAC designs, manufactures, and markets process control, process-enabling, and yield management solutions for the semiconductor and related electronics industries worldwide. It operates through three segments: Semiconductor Process Control, Specialty Semiconductor Process, and PCB, Display and Component Inspection.

KLAC’s trailing-12-month net income margin of 27.19% is 924.3% higher than the industry average of 2.65%. Likewise, trailing-12-month Return on Common Equity and Return on Total Assets of 90.35% and 17.45% are considerably higher than the industry averages of 3.99% and 1.56%, respectively.

KLAC’s total revenues for the fiscal third quarter that ended March 31, 2024, declined 3% year-over-year to $2.36 billion. Moreover, its non-GAAP net income attributable to KLAC stood at $715.14 million, down 6% from the year-ago quarter.

Also, its non-GAAP net income per share attributable to KLAC declined 4.2% over the prior-year quarter to $5.26. However, its cash and cash equivalents at end of period grew 17.8% year-over-year to $1.85 billion.

Analysts expect KLAC’s revenue for the quarter ending June 30, 2024, to increase 7% year-over-year to $2.52 billion. Its EPS for fiscal 2024 is expected to decline 7.7% year-over-year to $23.43. The company surpassed the Street revenue and EPS estimates in each of the trailing four quarters, which is impressive. Over the past year, the stock has gained 71.4%, closing the last trading session at $784.97.

KLAC’s POWR Ratings reflect its mixed prospects. It has an overall C rating, equating to Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

KLAC has a C grade for Growth, Stability, and Sentiment. Within the Semiconductor & Wireless Chips industry, it is ranked #19 out of 93 stocks. Click here for the additional POWR Ratings of KLAC (Value, Momentum, and Quality).

Stock #2: STMicroelectronics N.V. (STM)

Headquartered in Geneva, Switzerland, STM designs, develops, manufactures, and sells semiconductor products internationally. The company operates through the Automotive and Discrete Group, Analog, MEMS and Sensors Group, Microcontrollers, and Digital ICs Group segments.

On June 4, 2024, STM announced a long-term SiC supply agreement with Geely Auto Group to enhance powertrain efficiency for battery electric vehicles (BEVs). They also established an Innovation Joint Lab to develop smart, electrified, and connected automotive technologies. This agreement will allow STM to support automotive innovation and transformation in China.

On May 31, 2024, STM announced plans to build a fully integrated silicon carbide facility in Catania, Italy, with a projected €5 billion ($5.44 billion) investment supported by the State of Italy.

The facility, scheduled to start production in 2026 and reach full capacity by 2033, aims to enhance STM’s SiC technology leadership in the automotive and industrial sectors, focusing on electrification and energy efficiency solutions.

STM’s trailing-12-month gross profit margin of 44.88% is 9.5% lower than the industry average of 49.58%. On the other hand, its trailing-12-month EBIT margin and EBITDA margin of 24.95% and 34.74% are 425.3% and 254.8% higher than the industry averages of 4.75% and 9.79%, respectively.

For the fiscal first quarter that ended March 30, 2024, STM’s net revenues declined 18.4% year-over-year to $3.47 billion. For the same quarter, its net income attributable to parent company stockholders and earnings per share attributable to parent company stockholders stood at $513 million and $0.54, down 50.9% each from the year-ago quarter, respectively.

As of March 30, 2024, STM’s total assets amounted to $24.97 billion, compared to $24.45 billion as of December 31, 2023.

Street expects STM’s fiscal 2025 EPS to increase 39.9% year-over-year to $3.03. Its revenue for the quarter ending June 30, 2024, is expected to decline 24.4% year-over-year to $3.27 billion. STM’s stock has declined 11.5% year-to-date, closing the last trading session at $44.37.

STM’s POWR Ratings reflect this uncertain outlook. It has an overall rating of C, equating to Neutral in our proprietary rating system.

STM has a C grade for Momentum, Stability, and Sentiment. It is ranked #17 in the same industry. Get STM’s Growth, Value, and Quality ratings here.

Stock #1: ASE Technology Holding Co., Ltd. (ASX)

Headquartered in Kaohsiung, Taiwan, ASX provides semiconductor packaging and testing and electronic manufacturing services in the U.S., Taiwan, Asia, Europe, and internationally.

On May 29, 2024, ASX’s ASE Semiconductor announced the launch of powerSiP, an innovative power supply platform that can reduce signal and transmission losses while solving the present current density challenge.

The powerSiP platform provided an option to place the voltage regulator directly under the SoC and chiplets, and vertical integration allowed a large current supply at a short power delivery path.

ASX’s trailing-12-month levered FCF margin of 4.09% is 59.5% lower than the industry average of 10.08%. However, its trailing-12-month Return on Common Equity and Return on Total Capital of 11.25% and 5.22% are 182.1% and 100.2% higher than the industry averages of 3.99% and 2.61%, respectively.

ASX’s total net revenues for the fiscal first quarter that ended March 31, 2024, increased 1.5% year-over-year to NT$132.80 billion ($4.10 billion). The company’s gross profit rose 7.9% from the year-ago quarter to NT$20.87 billion ($645 million).

On the other hand, its net income attributable to shareholders of the parent stood at NT$5.68 billion ($175.62 million) and NT$1.28 per share, down 2.3% and 1.5% over the prior-year quarter, respectively.

For the quarter ending September 30, 2024, ASX’s revenue is expected to increase 8.6% year-over-year to $5.16 billion. Its EPS for the quarter ending June 30, 2024, is expected to decline 8% year-over-year to $0.11. The stock has gained 37.8% over the past year to close the last trading session at $10.94.

ASX’s mixed fundamentals are reflected in its POWR Ratings. It has an overall rating of C, equating to Neutral in our proprietary rating system.

It has a C grade for Stability, Sentiment, and Quality. It is ranked #16 in the Semiconductor & Wireless Chips industry. Click here to see ASX’s rating for Growth, Value, and Momentum.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

KLAC shares were trading at $778.27 per share on Thursday morning, down $6.70 (-0.85%). Year-to-date, KLAC has gained 34.46%, versus a 12.84% rise in the benchmark S&P 500 index during the same period.

About the Author: Neha Panjwani

From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
KLACGet RatingGet RatingGet Rating
STMGet RatingGet RatingGet Rating
ASXGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com

Bullish or Bearish Stock Set Up?

The S&P 500 (SPY) record highs sounds pretty darn bullish on the surface. Yet as we dig below the surface there are some curious signals that point more Risk Off. This is especially true as we come into the next Fed meeting after a round of data that points to inflation still being too high...only further delaying the first rate cut. What does this all mean for stocks from here? Steve Reitmeister offers his latest views on the market outlook along with a preview of his top picks to stay on step ahead of the market. Read on for more...

Unveiling Adobe (ADBE) Q2 Earnings: What Lies Ahead for Investors?

Software giant Adobe Inc. (ADBE) has released its second-quarter earnings, revealing double-digit growth in both revenue and profits. Yet, concerns arise around the complexities of navigating growth in the face of advancing AI technologies. Let’s analyze ADBE’s recent performance and assess key fundamentals to uncover what lies ahead for investors…

3 AI Stocks to Invest in for the Next Technological Revolution

The AI market is experiencing a significant growth trajectory, driven by widespread application across various industries. Hence, it could be wise to invest in top AI stocks, Alphabet (GOOGL), Meta Platforms (META), and Alibaba Group Holding (BABA) for the next technological revolution. Read more...

Analyzing Broadcom’s (AVGO) Q2 Earnings: Worth Investing?

Driven by a surge in demand for its AI products, Broadcom (AVGO) reported robust earnings in its latest quarterly results, exceeding expectations on both top and bottom lines. However, is the stock’s recent announcement of a 10-for-1 stock split worth investing in? Keep reading to find out…

Stock Alert: Breakout or Fake Out?

The S&P 500 (SPY) officially made new highs this week. Perhaps a reason to celebrate more gains on the way...or perhaps there are signs this move is hollow leading to more downside soon on the way. To help solve this riddle, 44 year investment veteran Steve Reitmeister shares his views along with a trading plan and top picks to stay on the right side of the action. That is what Steve Reitmeister will cover in his latest commentary below. Read on for more...

Read More Stories

More KLA Corp. (KLAC) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All KLAC News