(0:15) – Does it make sense for investors to buy semiconductors at current valuations?
(3:45) – Top stocks to add to your watchlist right now
(31:25) – Episode Summary: NVDA, AVGO, TSM, LRCX
podcast@Zacks.com
Welcome to episode #421 of the Zacks Market Edge Podcast.
Every week, host and Zacks Equity Strategist Tracy Liniec joins guests to discuss the hottest investing topics in stocks, bonds, and ETFs and how they impact your life.
This week, Tracy exclusively discusses semiconductor stocks. Should you buy semiconductor stocks now, or is it too late to get in?
Semiconductors: Too hot to handle?
Semiconductor stocks, which include not only chips but also semiconductor stocks, have been in decline for the past 18 months. Over the summer, stock prices took a lull and declined. However, some companies, like NVIDIA, are now back to all-time highs.
The stock price may rise further this earnings season.
Tracy looked at five of the biggest companies in the industry.
Is it too expensive to buy now, or is the growth so strong that you have to own it?
5 Semiconductor Stocks: Should You Buy Now?
1. NVIDIA Inc. (NVDA)
NVIDIA has been a top stock throughout the year. NVIDIA stock is up 184.2% year-to-date, easily outperforming the S&P 500, which is up 23%. However, the past three months have been eventful, with significant declines. But thanks to October’s surge, NVIDIA stock is up 15% in that time, while the S&P 500 is up just 4.2%.
The returns look great. Profits are expected to grow by 116% in FY2025 and a further 32.8% in FY2026.
NVIDIA’s forward P/E of 48 may seem expensive, but its PEG ratio is only 1.16. A PEG below 1.0 indicates that the company has both value and growth. NVIDIA’s PEG is pretty close to that.
Should investors still buy NVIDIA?
2. Advanced Micro Devices Company (AMD)
Advanced Micro Devices stock lags in 2024. Advanced Micro Devices’ stock price is up 48.6% over last year, but only 12.8% since the beginning of the year. Over the past three months, Advanced Micro Devices is down 4.9% while the S&P 500 is up 4.2%.
Profits are expected to grow by 26.8% in 2024 and by a further 54.6% in 2025. However, Advanced Micro Devices don’t come cheap. The forward P/E ratio is 46x, but the PEG ratio is low at just 1.6x.
Is this a buying opportunity for Advanced Micro Devices?
3.Broadcom Corporation (AVGO)
Broadcom stock is set to reach new highs again in 2024. Broadcom has gained 67.3% since the beginning of the year, outpacing the S&P 500, which has gained 23.3%. It has similarly outperformed over the past three months, rising 13.4% versus the S&P 500’s 4.2%.
story continues
Profits are expected to grow 14% in FY2024 and a further 27% in FY2025. Broadcom’s P/E ratio is a bit more reasonable at 36.7x. However, the PEG ratio is 2.2. This is higher than NVIDIA and Advanced Micro Devices.
Should Broadcom be added to your shortlist?
4. Lam Research Corporation (LRCX)
Of these five stocks, only Lam Research has underperformed the S&P 500 since the beginning of the year. Lam Research stock has declined 2.4% since the beginning of the year. Over the past three months, performance has been dismal. During this period, the stock price fell 26.7%.
However, profits are expected to grow by 8.7% in FY2025 and further by 32.6% in FY2026. Lam Research has an attractive valuation with a forward P/E ratio of just 22.8x and a PEG ratio of 1.69x.
Is this stock decline a buying opportunity for Lam Research?
5. Taiwan Semiconductor Manufacturing Co., Ltd. (TSM)
Taiwan Semiconductor just announced its financial results, and it was another win. Additionally, strong demand for AI chips is expected in the coming years.
Taiwan Semiconductor’s stock price soared following the earnings news, rising 19.1% in the past three months. However, it has been on an upward trend throughout the year and is currently up 102.7% since the beginning of the year.
Profits are expected to grow by 24.5% in 2024 and by a further 28.4% in 2025. Notably, despite the large share price increase, the stock remains undervalued. Taiwan Semiconductor’s Forward P/E ratio is 29.1, but its PEG is only 1.1.
Should Taiwan Semiconductor be added to the shortlist?
What else should you know about semiconductor stocks?
Watch this week’s video podcast to find out.
(Full disclosure, Tracey owns AVGO stock in the Zacks Insider Trader portfolio.)
Want the latest recommendations from Zacks Investment Research? Today you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free stock analysis report
Lam Research Corporation (LRCX): Free Stock Analysis Report
Broadcom Inc. (AVGO): Free Stock Analysis Report
Taiwan Semiconductor Manufacturing Co., Ltd. (TSM): Free Stock Analysis Report
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