One of the most best performing industries over the last three years has been electric vehicles (EVs). Nio (NIO) is up an amazing 440% and Tesla (TSLA) is up more than 1,600%.
This trend is likely to continue in the coming decade as the recently passed U.S. infrastructure bill has earmarked money for EV charging. Plus, most automakers are making investments in EVs and plan to launch lineups over the next couple of years.
EV manufacturers aren’t the only companies that stand to benefit. In many modern EVs, there are over 3,000 semiconductor chips. Therefore today I’m going to take a look at three chip stocks, NXP Semiconductors N.V. (NXPI), ON Semiconductor Corporation (ON), and Intel Corporation (INTC), which should continue to benefit as the EV industry grows.
NXP Semiconductors N.V. (NXPI)
NXPI is a leading supplier of high-performance mixed-signal products. The company acquired Freescale Semiconductor in 2015 and now has a significant market share in the automotive market. It supplies microcontrollers and analog chips into automotive clusters, powertrains, infotainment systems, and radars.
It also serves industrial and Internet of Things, mobile, and communications infrastructure. NXPI’s earnings jumped 65.9% year over year in the third quarter due to solid performance in the automotive, mobile, industrial, and IoT end markets. Plus, its safety products for advanced driver assistance systems are seeing momentum. Its rising 5G network deployments are also helping to drive growth in the communication business.
NXPI has an overall grade of A, which translates into a Strong Buy rating in our POWR Ratings system. The company has a Growth Grade of B as earnings have grown an average of 19.3% per year over the past five years and are expected to rise 35.1% year over year in the current quarter. NXPI also has a Value Grade of B, which isn’t surprising, with a forward P/E of 17.79.
We also provide Momentum, Stability, Sentiment, and Quality grades for NXPI, which can be found here. NXPi is ranked #13 in the A-rated Semiconductor & Wireless Chip industry. For more top stocks in this industry, click here.
ON Semiconductor Corporation (ON)
ON is a leading supplier of power and analog semiconductors, as well as sensors. The company is the second-largest global supplier of discrete transistors like insulated gate bipolar transistors (IGBTs), metal oxide semiconductor field-effect transistors (MOSFETs), and a significant integrated power chip business.
It is also the largest supplier of image sensors to the automotive market, targeting autonomous driving applications. Its third-quarter earnings and revenues topped estimates, with earnings jumping 222% year over year due to a strong demand environment for power and sensing products in the automotive and industrial markets. ON is also gaining on electric vehicle manufacturers’ demand for silicon carbide and insulated-gate bipolar transistor-based products.
The company has an overall grade of B and a Buy rating in our POWR Ratings system. ON has a Growth Grade of A as earnings are forecasted to soar 165.7% year over year in the current quarter and 131.4% in the next quarter. The firm also has a Momentum Grade of B, driven by strong near and long-term performance. The stock is up over 32% in the past month and 90.3% over the past year.
For the rest of ON’s grades (Value, Stability, Sentiment, and Quality), click here. ON is ranked #34 in the A-rated Semiconductor & Wireless Chip industry.
Intel Corporation (INTC)
INTC is the world’s largest chipmaker. The company designs and manufactures microprocessors for the global personal computer and data center markets. Its server processor business is benefiting from the shift to the cloud, and the company has also been expanding into new solutions, including the Internet of Things, artificial intelligence, and automotive.
The company’s earnings surged 58.3% year over year in the third quarter due to strong performance in its Mobileye self-driving car company businesses, and the recovery of its enterprise business in the data center segment, with the latter being a significant driver of growth. Plus, INTC is expected to benefit from higher demand for its 10 nanometer SuperFin process-based 11th Gen core processors.
INTC has an overall grade of A, translating into a Strong Buy rating in our POWR Ratings system. The company has a Value Grade of A, which makes sense with a trailing P/E of 9.66 and a forward P/E of 13.76. INTC also has a Quality Grade of B due to a solid balance sheet. For instance, its current ratio of 2.1 indicates it has more than enough liquidity to handle short-term obligations.
Its debt-to-equity ratio of 0.5 is also encouraging. To access all of INTC’s grades, including Growth, Momentum, Stability, and Sentiment, make sure to visit this link. INTC is ranked # 10 in the Semiconductor & Wireless Chip industry.
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This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years.
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NXPI shares were trading at $223.94 per share on Monday afternoon, up $11.49 (+5.41%). Year-to-date, NXPI has gained 42.02%, versus a 25.48% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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