The semiconductor industry is thriving due to technological advances and increasing demand for equipment that utilizes chips. The integration of AI-driven features and innovative enhancements into smartphones, computers, and consumer electronics has made semiconductors an essential part of everyday life, accelerating demand across industries.
Amid this surge, investors may consider focusing on fundamentally sound semiconductor stocks such as Taiwan Semiconductor Manufacturing Co., Ltd. (TSM), Photronics Inc. (PLAB), and Quarvo Inc. (QRVO). That would be good. These companies are poised to benefit from rapid growth in semiconductor demand.
Major innovations such as AI, machine learning, 5G networks, big data, and electric vehicles are driving demand for semiconductor chips. With frequent breakthrough innovations in gadgets powered by these chips, both average consumers and technology enthusiasts are increasingly attracted to these products, driving demand for more. Masu.
According to research by Counterpoint, global smartphone shipments are expected to increase by 5% year-on-year in 2024, reaching 1.23 billion units, the highest in five years. The incorporation of generative AI capabilities into smartphones is a key factor driving this demand growth.
Similarly, the PC market is seeing increased demand for chips, especially in graphics processing units (GPUs) used for gaming, cryptocurrency mining, and video editing. The continued need for more advanced GPUs continues to drive growth in the PC segment.
Gartner, Inc. (IT) reports that global PC shipments reached 60.6 million units in the second quarter of 2024, an increase of 1.9% compared to the same period in 2023. This highlights the growing importance of semiconductors in supporting a variety of computing functions.
The semiconductor industry’s performance reflects these trends. According to a report by the Semiconductor Industry Association (SIA), global semiconductor sales reached $149.9 billion in the second quarter of 2024, an increase of 18.3% compared to the second quarter of 2023.
Looking to the future, World Semiconductor Trade Statistics (WSTS) predicts that the global semiconductor market will grow by 12.5%, reaching $687 billion in 2024 alone. This growth outlook highlights the tremendous potential for continued success in the semiconductor sector.
So, with these trends in mind, let’s analyze the fundamentals of three semiconductor and wireless chip stocks, starting with number three.
Stock #3: Taiwan Semiconductor Manufacturing Co., Ltd. (TSM)
Headquartered in Hsinchu City, Taiwan, TSM manufactures, packages, tests and sells integrated circuits and other semiconductor devices. The company offers a variety of wafer fabrication processes, as well as customer and engineering support services.
On October 3, TSM announced that it has signed a memorandum of understanding to collaborate with Amkor Technology, Inc. (AMKR) to bring advanced packaging and test capabilities to Arizona, further expanding the region’s semiconductor ecosystem.
Through this agreement, TSM will receive contracted turnkey advanced packaging and testing services from AMKR. This collaboration will enable TSM to streamline processes and better serve customers. Leveraging AMKR’s expertise will enable TSM to increase operational efficiency and improve speed and quality to meet customer demands.
On August 20, ESMC, a joint venture between TSM, Robert Bosch GmbH, Infineon Technologies AG (IFNNY) and NXP Semiconductors NV (NXPI), marks the initial stages of land preparation for the joint venture’s first semiconductor laboratory. The ceremony was announced. Dresden, Germany.
The facility is expected to bring TSM’s advanced manufacturing capabilities closer to European customers, fostering stronger partnerships and expanding its influence in the European market.
TSM’s trailing 12-month leveraged FCF margin of 22.86% is 117.20% higher than the industry average of 10.53%. The trailing 12-month EBIT margin was 43.62%, which was 780.3% higher than the industry average of 4.96%. Similarly, the company’s trailing twelve month gross margin of 54.45% was 8.4% higher than the industry average of 50.26%.
TSM’s net revenue for the fiscal third quarter ended September 30, 2024 was $23.5 billion, an increase of 39% compared to the same period last year. Gross profit increased 48.1% year-on-year to $13.59 billion. Furthermore, the company’s operating profit was $11.16 billion, an increase of 58.2% year-on-year.
Additionally, TSM’s net income and EPS totaled $10.06 billion and $0.39, representing year-over-year growth of 54.2%, respectively.
Analysts expect the company’s fiscal fourth quarter sales (ending December 2024) to increase 32.4% year over year to $26.24 billion. The company’s EPS for the quarter is expected to be $2.17, up 51% from the year-ago period. What’s more, the company has surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is great.
TSM stock has increased 51.8% over the past six months and 124.1% over the past year, closing at $200.78.
TSM’s POWR rating reflects TSM’s solid outlook. The stock has an overall rating of B, which equates to a Buy according to our proprietary rating system. POWR ratings are calculated by considering 118 different factors, each weighted to the best degree.
TSM earns an A grade for sentiment and quality. Ranked #8 out of 91 stocks in the Semiconductor & Wireless Chips industry.
Click here to access additional TSM ratings on Stability, Momentum, Value, and Growth.
Stock #2: Photronics Inc. (PLAB)
PLAB is a global manufacturer and distributor of integrated circuits, flat panel displays (FPDs), and photomask products for transferring circuit patterns onto semiconductor wafers and substrates. The company sells products to semiconductor and FPD manufacturers, designers, foundries, and high-performance electronics manufacturers.
Talking about PLAB’s trailing 12-month EBITDA margin of 35.95%, it is 266.6% higher than the industry average of 9.81%. The stock’s trailing 12-month leveraged FCF margin is 10.95%, which is 4.1% higher than the sector average of 10.53%. Moreover, its net profit margin for the trailing twelve months was 16.22%, which was 329.8% higher than the industry average of 3.77%.
PLAB’s revenue for the fiscal third quarter ended July 28, 2024 was $210.98 million. Gross profit reached $75.14 million. Additionally, the company’s non-GAAP net income attributable to PLAB increased slightly year over year to $31.92 million. Meanwhile, EPS was $0.51.
As of July 28, 2024, PLAB’s cash and cash equivalents were $537.33 million, compared to $499.29 million as of October 31, 2023. Total current assets increased from $785.45 million as of October 31, 2023 to $892.64 million.
Consensus revenue forecast for the fiscal year ending October 2025 is $940 million, reflecting a 9% year-over-year increase. EPS for the period is expected to be $2.20, up 5.8% year over year.
PLAB stock last closed at $23.74, up 2.7% over the past month and 17.2% over the past year.
PLAB’s solid fundamentals are reflected in its POWR rating. The overall rating is B, which is equivalent to a “buy” according to our own rating system.
PLAB’s value and quality is B grade. It ranks 7th out of 91 stocks in its industry.
Click here to access additional grades for PLAB’s Growth, Stability, Momentum, and Sentiment Ratings.
Stock 1: Qorvo, Inc. (QRVO)
QRVO develops and commercializes technology for wireless, wireline and power markets. The company’s operations span three segments. Connectivity and Sensors Group (CSG); and Advanced Cellular Group (ACG). We also provide foundry services for defense and aerospace customers.
On January 31, QRVO announced a definitive agreement to acquire Anokiwave, a supplier of high-performance silicon integrated circuits for intelligent active array antennas used in defense, SATCOM, and 5G applications. Anokiwave’s high-frequency beamforming and IF-to-RF conversion ICs complement QRVO’s existing RF front-end portfolio.
The combination of QRVO’s capabilities and Anokiwave’s technology will enable QRVO to deliver highly integrated solutions and SiPs for defense, aerospace, and network infrastructure.
QRVO’s trailing twelve month EBIT margin was 11.12%, which was 124.3% higher than the industry average of 4.96%. The company’s trailing 12-month leveraged FCF margin was 19.06%, which is 81% higher than the industry average of 10.53%. Additionally, ROTC 4.92% is 76.6% higher than the industry average of 2.79%.
QRVO’s revenue for the first quarter of fiscal 2025 ended June 29, 2024 was $886.67 million, an increase of 36.2% year over year. Non-GAAP operating income increased 110.1% year over year to $98.13 million.
Additionally, the company’s non-GAAP net income was $83.52 million, or $0.87 per share, an increase of 148.7% and 155.9%, respectively, from the prior-year period.
QRVO expects continued growth in revenue, gross profit and EPS for the September 2024 quarter. Revenue is expected to be approximately $1.025 billion, with potential headroom of $25 million. Non-GAAP gross margin is expected to be 46% to 47%. Meanwhile, non-GAAP earnings per share are expected to be between $1.75 and $1.95.
Street expects QRVO’s sales and EPS to increase by 7.8% and 27.9% from the previous year to $4.26 billion and $7.94, respectively, for the next fiscal year (ending March 2026). Additionally, the company beat consensus revenue and EPS estimates in each of the trailing four quarters.
QRVO stock last traded at $104.50, up 4.7% over the past month and 14% over the past year.
QRVO’s promising outlook is reflected in its POWR rating. The overall rating is B, which is equivalent to a “buy” according to our own rating system.
QRVO has a B for Growth, Value, and Quality. Ranked #4 out of 91 stocks in the Semiconductor & Wireless Chips industry.
In addition to the above, we also gave QRVO grades for momentum, sentiment, and stability. All QRVO ratings are available here.
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TSM stock fell $1.08 (-0.54%) in pre-market trading on Monday. Year-to-date, TSM is up 94.72%, compared to the benchmark S&P 500 index’s gain of 24.15% over the same period.
About the author: Aanchal Sugandh
Aanchal’s passion for financial markets drives his work as an investment analyst and journalist. She has a bachelor’s degree in finance and is pursuing a CFA program. She is adept at using fundamental analysis skills to assess the long-term prospects of stocks. Her goal is to help investors build portfolios that deliver sustainable returns. more…
