The semiconductor industry continues to reel under lingering logistic disruptions worldwide. Moreover, the ongoing China-Taiwan conflict could cause further supply-related uncertainties as Taiwanese foundries account for 65% of the global market.
However, rising government and private investments to ramp up chip production should drive the industry’s growth. Recently, President Joe Biden signed the much-awaited, multi-billion-dollar CHIPS and Science Act, which promises to fortify America’s semiconductor industry. He believes it to be “a once-in-a-generation investment in America itself.”
According to the Semiconductor Industry Association, worldwide sales of semiconductors amounted to $152.50 billion during the second quarter of 2022, up 13.3% year-over-year. The robust sales demonstrate the industry’s ability to ramp up production. According to SpendEdge, the semiconductor market will expand at a CAGR of 6.8% from 2021-2025.
Given this backdrop, fundamentally sound semiconductor stocks STMicroelectronics N.V. (STM), Texas Instruments Inc. (TXN), MaxLinear, Inc. (MXL), and Rambus, Inc. (RMBS) could be solid additions to your portfolio now.
STMicroelectronics N.V. (STM)
Headquartered in Geneva, Switzerland, STM and its subsidiaries create, develop, produce, and distribute semiconductor products in Europe, the Middle East, Africa, the Americas, and the Asia Pacific. It has three segments: the Automotive and Discrete Group; the Analog, MEMS, and Sensors Group; and the Microcontrollers and Digital ICs Group.
On August 9, 2022, STM launched version 4.20 of its TouchGFX user-interface design software for STM32 microcontrollers. This product update offers support for the new NeoChrom graphics accelerator, which allows full-screen rotation at any angle, and supports texture mapping for smooth, fluid graphics and high user convenience. This should enhance its product offerings.
It was announced on July 20, 2022, that CARIAD, the software unit of Volkswagen AG (VWAGY), and STM would launch the joint development of an automotive system-on-chip. This collaboration is expected to drive solid growth for the company.
STM’s net revenues came in at $3.84 billion for the second quarter ended July 2, 2022, up 28.3% year-over-year. Its net income increased 110.4% year-over-year to $867 million, while its EPS came in at $0.92, up 109.1% year-over-year.
Analysts expect STM’s revenue to increase 25.7% year-over-year to $16.05 billion in the current year. Its EPS is estimated to increase 78.2% year-over-year to $3.86 in 2022. It has surpassed EPS estimates in three out of four trailing quarters. Over the past month, the stock has gained 24.4% to close the last trading session at $38.76.
STM has an overall A rating, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade in Sentiment and a B grade in Growth, Value, and Quality. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked first among 95 stocks. Click here to see the additional POWR Ratings for Momentum and Stability for STM.
Texas Instruments Inc. (TXN)
TXN designs, manufactures, and sells semiconductors to electronics designers and manufacturers worldwide. It operates in two segments, Analog and Embedded Processing. It markets and sells its semiconductor products through direct sales and distributors and through its website.
On July 26, 2022, Rich Templeton, TXN’s Chairman, President, and CEO, said, “Our cash flow from operations of $8.70 billion for the trailing 12 months again underscored the strength of our business model.”
He added, “This reflects the quality of our product portfolio, as well as the efficiency of our manufacturing strategy, including the benefit of 300-millimeter production.”
TXN’s revenue came in at $5.21 billion for the second quarter ended June 30, 2022, up 13.8% year-over-year. Its net income increased 18.6% year-over-year to $2.29 billion. Moreover, the company’s EPS came in at $2.45, up 19.5% year-over-year.
Analysts expect TXN’s revenue to increase 10.2% year-over-year to $20.21 billion in 2022. Its EPS is estimated to increase 12.9% year-over-year to $9.58 in 2022. It has surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 20% to close the last trading session at $185.38.
TXN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. It has a B grade for Quality and Sentiment.
TXN is ranked #32 in the Semiconductor & Wireless Chip industry. Click here to see the additional POWR Ratings for TXN (Growth, Momentum, Stability, and Value).
MaxLinear, Inc. (MXL)
MXL provides radiofrequency, high-performance analog, and mixed-signal communications systems-on-chip solutions for the connected home, wired and wireless infrastructure and industrial and multi-market applications worldwide.
On August 10, 2022, MXL and DustPhotonics, a leading silicon photonics technology and solutions developer, announced their partnership to launch a silicon photonics chipset with integrated lasers directly driven from a DSP without the use of any external driver chip. The product is expected to put up exceptional performance and boost MXL’s product portfolio.
MXL’s net revenue came in at $280.01 million for the second quarter ended June 30, 2022, up 36.3% year-over-year. Its net income came in at $31.97 million, up 4,261% year-over-year. In addition, its EPS came in at $0.40, up 3900% year-over-year.
Street expects MXL’s revenue to increase 24.9% year-over-year to $1.11 billion in the current year. Its EPS is estimated to increase 54.6% year over year to $4.16 in 2022. Also, it surpassed EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 24.9% to close the last trading session at $41.44.
MXL has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and a B for Quality and Value. It is ranked #8 in the same industry. We’ve also rated MXL for Momentum, Sentiment, and Stability. Get all the MXL ratings here.
Rambus, Inc. (RMBS)
RMBS provides semiconductor products in the United States, Taiwan, South Korea, Japan, Europe, Canada, Singapore, China, and internationally. The company offers DDR memory interface chips; silicon IP; and physical interface and digital controller IP.
On July 18, 2022, RMBS announced the expansion of its DDR5 memory interface chip portfolio with the addition of the Rambus SPD (Serial Presence Detect) Hub and Temperature Sensor. Also, on May 24, 2022, RMBS completed the acquisition of Hardent, Inc., a leading SoC digital design company.
Luc Seraphin, RMBS’ President and CEO said, “Hardent’s advanced SoC design experience amplifies our CXL development efforts, and we are very pleased to welcome our new colleagues to the Rambus team.”
RMBS’ total revenue came in at $121.13 million for the second quarter ended June 30, 2022, up 42.7% year-over-year. Its net income came in at $35.02 million, up 213.6% year-over-year. The company’s EPS came in at $0.31, up 210% year-over-year.
Analysts expect RMBS’ revenue to increase 22.2% year-over-year to $553.56 million in the current year. Its EPS is estimated to rise 8.4% per annum for the next five years. Also, it surpassed EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 30.5% to close the last trading session at $27.54.
RMBS has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and a B for Quality. It is ranked #19 in the same industry. We’ve also rated RMBS for Momentum, Value, Sentiment, and Stability. Get all the ratings here.
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STM shares were trading at $38.36 per share on Monday afternoon, down $0.40 (-1.03%). Year-to-date, STM has declined -21.31%, versus a -9.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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