Even though the current semiconductor chip shortage affects several industries worldwide, the semiconductor industry witnessed 27.6% year-over-year sales growth in the third quarter. And although the industry is facing production logjams, increasing corporate investments and efforts made by governments to address this shortage should help it achieve a solid production rebound.

Also, technological breakthroughs, such as manufacturing chips that use a 3 nm process that consumes low power and offers low latency and better performance, should drive the industry’s growth. Investor interest in this space is evidenced by the SPDR S&P Semiconductor ETF’s (XSD) 22.6% gains over the past month. The global semiconductor market is expected to grow at a 7.7% CAGR to $778 billion by 2026.

Given this backdrop, we think fundamentally sound semiconductor stocks Wolfspeed, Inc. (WOLF), Silicon Laboratories Inc. (SLAB), SiTime Corporation (SITM), and MaxLinear, Inc. (MXL), which have rallied by more than 35% in price over the past month, should continue advancing. Therefore, we think these stocks could be solid additions to one’s  portfolio now.

Click here to checkout our Semiconductor Industry Report for 2021

Wolfspeed, Inc. (WOLF)

Formerly known as Cree, Inc., WOLF provides silicon carbide and gallium nitride (GaN) materials, power devices, and radiofrequency (RF) devices based on wide bandgap semiconductor materials and silicon. The Durham, N.C., company’s products are also used in transportation, fast charging, wireless systems, 5G, motor drives, renewable energy and storage, and aerospace and defense applications.

On October 18, 2021, Shanghai-based ZINSIGHT Technology Co., Ltd., an innovator of advanced electric drive systems, announced it would utilize WOLF’s Wolfspeed 1200V Silicon Carbide MOSFETs in its advanced motor controller for ultra-high-speed air compressors in fuel cell vehicle (FCV) engines. Amid various efforts to  achieve net-zero emissions in the coming decades, the use of Silicon Carbide in battery-electric vehicles (BEVs) and FCVs will provide significant cost savings. At the same time, high-efficiency power modules enable lower energy losses and higher range. This silicon carbide technology should  allow WOLF to gain market reach in the automotive sector.

On October 4, 2021, WOLF and General Motors (GM) formed a strategic supplier agreement to develop and provide silicon carbide power device solutions in the integrated power electronics contained within GM’s Ultium Drive units in its next-generation EVs. WOLF’s silicon carbide devices should  enable GM to install more efficient EV propulsion systems to extend the range of its rapidly expanding EV portfolio.

For its fiscal first quarter, ended September 26, 2021, WOLF’s net revenue came in at $156.60 million, representing a 35.6% rise from the prior-year period. Its non-GAAP gross profit has increased 31.6% year-over-year to $52.50 million. The company had $261.50 million in cash and cash equivalents as of September 26, 2021.

The $709.34 million consensus revenue estimate for the current year represents a 35% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 93.9% in price over the past year and 64.3% over the past month. It closed yesterday’s trading session at $137.49.

Silicon Laboratories Inc. (SLAB)

SLAB in Austin, Tex., is a fabless semiconductor company that provides silicon, software, and solutions for the Internet of Things (IoT), industrial, and consumer markets worldwide. The company offers single- and multi-protocol system-on-chip (SoC) devices and modules, microcontrollers, and wireless and sensor products, and Micrium, a real-time operating system that helps simplify software development for IoT developers. It  markets its products primarily through a direct sales force, independent sales representatives, and distributors.

On September 14, SLAB introduced its Unify Software Development Kit (SDK), which eases wireless protocol interoperability across ecosystems with common building blocks for gateways, wireless APs, and IoT end products. With its ‘design once; support all’ capability, the Unify SDK accelerates time-to-market, streamlines maintenance, and future-proofs investments by simplifying the process for updates. It allows IoT providers to develop and maintain a single software code base for IoT devices, including gateways, and easily add wireless protocol support when desired. SLAB expects to witness high demand for this SDK in the near term.

SLAB unveiled new sub-1-GHz (sub-GHz) SoCs in September , delivering the world’s first sub-GHz wireless solutions that combine long-range RF and energy efficiency with certified Arm PSA Level 3 security to meet the global demand for high-performance, battery-powered IoT products. These new SoCs’ addition to SLAB’s award-winning Series 2 platform will enable the company to capitalize on the growing demand for long-range wireless connectivity from various industries.

SLAB’s revenues rose 39.3% year-over-year to $184.83 million for its fiscal third quarter ended October 2, 2021. The company’s gross profit came in at $131.70 million, indicating a 45.1% gain from the prior-year period. Its net income was  $2.09 billion for the quarter, up 65904.3% from the year-ago period. And its  EPS increased 66,700% year-over-year to $46.76. The company had $1.36 billion in cash and cash equivalents as of October 2, 2021.

The stock has surpassed consensus EPS estimates in three of the trailing four quarters. Analysts expect the stock’s EPS to grow at a 10.2% rate per annum over the next five years. SLAB’s shares have gained 77.6% in price over the past year and 45.9% over the past month. It ended yesterday’s trading session at $202.62.

SiTime Corporation (SITM)

SITM provides silicon timing systems, resonators and clock integrated circuits, and various types of oscillators internationally. The Sant Clara, Calif.-based company serves enterprise, telecommunications, infrastructure, automotive, industrial, Internet of things (IoT), mobile and wearables, consumer, and aerospace and defense. It offers its products through distributors and resellers.

On September 29, 2021, SITM introduced its SiT3901 µPower digitally controlled MEMS oscillator (DCXO) targeting power-sensitive and space-constrained mobile and IoT applications. The SiT3901 improves wireless charging speed by up to 25% while reducing the overall timing solution area by 90%. With the growing demand for IoT products, this MEMS oscillator is expected to gain widespread recognition across the industry in the near term.

On July 21, 2021, Square Inc. (SQ), a financial services and digital payments company, announced its use of SITM’s SiT8008 low-power, programmable MEMS oscillator for SQ’s Square Terminal and Square Register point-of-sale (POS) products. As an external oscillator, SiT8008 will consistently deliver 10-100 times better clock stability due to superior MEMS and analog technology and SITM’s systems expertise and provide excellent configurability to the user and ensure fast delivery. SITM expects to witness high demand for the oscillator in the coming months.

For its fiscal third quarter, ended September 30, 2021, SITM’s revenue increased 92.9% year-over-year to $63.03 million. The company’s non-GAAP gross profit was  $42.14 million, up 147.4% from the prior-year period. Its non-GAAP income from operations was  $22.03 million, indicating a 388.7% rise from its year-ago period. While its non-GAAP net income increased 398% year-over-year to $21.91 million, its non-GAAP EPS increased 347.8% to $1.03. SITM had $267.04 million in cash and cash equivalents as of September 30, 2021.

Analysts expect the stock’s EPS to grow 478.3% year-over-year to $2.66 in the current year. The $214.14 million consensus revenue estimate for the current year represents an 84.4% rise from the prior-year period. It surpassed consensus EPS estimates in each of the trailing four quarters. Analysts expect the stock’s EPS to grow at a rate of 125% per annum over the next five years.

SITM has gained 181.5% in price over the past year and 35.9% over the past month. It ended yesterday’s trading session at $291.34.

MaxLinear, Inc. (MXL)

MXL provides radiofrequency (RF), high-performance analog, and mixed-signal communications systems-on-chip solutions (SoCs) for the connected home, wired, and wireless infrastructure, and industrial and multi-market applications worldwide. It serves electronics distributors, module makers, OEMs, and ODMs through a direct sales force, third-party sales representatives, and a network of distributors. MXL is headquartered in Carlsbad, Calif.

On November 3, 2021, MXL announced the immediate availability of XR77103-MoCA, a power management integrated circuit (PMIC) designed to meet the power needs of MaxLinear MxL370x MoCA 2.0 and MxL371x MoCA 2.5 SoCs. As service providers invest in multi-gigabit broadband infrastructure, using Multimedia over Coax Alliance (MoCA) solutions create a reliable wired backbone that can distribute multi-gigabit speeds seamlessly throughout the office or in-home networks.

On August 25, 2021, MXL released DMI920, a new G.hn evaluation platform that reliably transports high-speed data over new or existing AC or DC power lines, twisted pair, or coaxial cable. The DMI920 combines MXL’s G.hn technology, its USB, Ethernet, and serial communication products to address the entire range of connectivity needs for a wide variety of Industrial IoT (IIoT) applications. The rising deployment of high-speed IoT devices across various industries should enable MXL to witness good sales in the coming months.

For its fiscal third quarter, ended September 30, 2021, MXL’s net revenue was $229.77 million, representing a 46.7% rise from the prior-year period. The company’s non-GAAP gross profit was  $140.81 million, up 55% from the prior-year period. Its non-GAAP income from operations was  $66.38 million, indicating a 122.7% rise from the prior-year period. MXL’s non-GAAP net income came in at $59.91 million, representing a 149.4% rise from the year-ago period. And its non-GAAP EPS increased 134.4% year-over-year to $0.75. As of September 30, 2021, the company had $169.42 million in cash and cash equivalents.

Analysts expect MXL’s EPS to rise 85.8% year-over-year to $2.67 in the current year. A $889.30 million consensus revenue estimate for the current year represents an 85.8% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The company’s EPS is expected to grow at 17.5% per annum over the next five years.

The stock has gained 140.2% in price over the past year and 40.4% over the past month. It ended yesterday’s trading session at $68.32.

Click here to checkout our Semiconductor Industry Report for 2021

WOLF shares were unchanged in after-hours trading Tuesday. Year-to-date, WOLF has gained 27.46%, versus a 26.23% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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