When it comes to semiconductors, most investors gravitate toward the industry’s top names, such as NVIDIA (NVDA). However, the industry has a wide range of other publicly traded chipmakers, some of which are deserving of your investing dollars. At the very least, these stocks are worthy of analysis.
Shift your attention away from NVDA and the sector’s recent top performers, and you will find some surprisingly attractive buying opportunities. The moral of this story is it is a mistake to assume all semiconductor stocks are overvalued simply because the industry has been on a hot streak for more than a year.
Taiwan Semiconductor Manufacturer Co (TSM) and Intel (INTC) are two semiconductor stocks every investor should analyze in-depth. I’ve done the work for you. Here is a quick look at each of these stocks.
Taiwan Semiconductor Manufacturer Co (TSM)
TSM is the global leader in dedicated circuit foundry. TSM makes integrated circuits for clients in accordance with proprietary IC designs. This feat is accomplished through TSM’s advanced production processes.
TSM is a POWR Ratings disappointment with an overall grade of C, which translates into a Neutral rating in the POWR Rating system. The stock has D grades in the Value and Growth components. Click here to learn how TSM grades in the remaining components, including Momentum, Stability, Sentiment, and Quality.
Out of the 99 publicly traded companies in the B-rated Semiconductor & Wireless Chip industry, TSM is ranked just outside of the top half, slotting in at 54th overall. You can find the top stocks in this industry by clicking here.
TSM is trading within $17 of its 52-week high, yet it appears overvalued with a forward P/E ratio of 30.84. Analysts have a bearish outlook for TSM, setting an average target price of $85.78. If TSM drops to this price, it will have declined by nearly 29% in value.
INTC sells more chipsets and microprocessors than any other semiconductor. However, INTC has struggled of late as competitors have captured some of the company’s market share.
INTC is a Strong Buy as it has an overall grade of A in the POWR Ratings system. The stock also excels in nearly every component, grading out with an A in the Value component and Bs in the Momentum and Quality components. You can find out how INTC grades in the remainder of the components such as Sentiment, Stability, and Growth by clicking here.
Out of the 99 stocks in the Semiconductor & Wireless Chip space, INTC is ranked 10th. If analysts are correct, INTC will move to the average target price of $62.59. Such a jump equates to a nearly 17% gain.
Investors on the prowl for a chipmaker with solid value and minimal downside in the event of a bear market have found it in INTC. INTC has a forward P/E ratio of 11.17, which is surprisingly low for a semiconductor stock. INTC’s low beta of 0.60 is also a bit surprising.
Which Semiconductor Stock is the Better Buy?
INTC is the better play. Aside from INTC’s superior POWR Ratings, the stock has a higher industry ranking than TSM. INTC is ranked 44 spots ahead of TSM in the Semiconductor space.
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TSM shares were trading at $121.71 per share on Wednesday morning, down $2.99 (-2.40%). Year-to-date, TSM has gained 12.29%, versus a 21.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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