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3 Strong Buy Semiconductor Stocks to Consider Now

Ryan McQueeney
Updated
Some investors are rotating out of earlier high flying technology stocks into cheap emerging markets.

Semiconductor stocks were battered by market volatility earlier this year, but tech has made a strong recovery, and with several interesting trends like the Internet of Things and artificial intelligence on the rise, it is still an exciting time to be investing in chip-making corner of the technology sector.

While tech behemoths like Microsoft MSFT and Apple AAPL may hog all the headlines, it has really been the companies powering their technologies—the semiconductor manufacturers—that have been garnering the attention of Wall Street.

Indeed, as our “Computer and Technology” sector has gained more than 22% over the past year, semiconductor companies have been a driving factor behind its growth. The aforementioned emerging tech trends have created new consumer demand, and the semiconductor makers are delivering.

Luckily, the proven Zacks stock picking methods are effective across all industries. Check out these Zacks Rank #1 (Strong Buy) semiconductor stocks right now:

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1. Mellanox Technologies, Inc. (MLNX)

Mellanox Technologies is a leading supplier of semiconductor-based, interconnected products to world-class server, storage, and infrastructure OEMs. The company's VPI enables standard communication protocols to operate over any converged network with the same software solution.

MLNX has started to pick up steam after its fourth consecutive earnings beat. It is also an explosive growth pick, with earnings and revenue expected to improve by 90% and 23%, respectively, this year. Shares are currently trading with a reasonable Forward P/E of 19.7 and an attractive PEG of 1.3.

 

2. Intel Corporation (INTC)

As the world’s largest semiconductor manufacturer, Intel has its hands in nearly every corner of the modern tech world. And as cloud computing and the Internet of Things continue to grow, Intel should continue to benefit. Plus, its broad product portfolio and diverse operations might protect investors in comparison to niche chip makers during trade war uncertainty.

On top of its strong Zacks Rank, INTC is sporting “B” grades in each of the Value, Growth, and Momentum categories of our Style Scores system. Earnings growth is expected to exceed 16% this year, while revenues are projected to improve by 9%. Plus, estimates are trending higher, and Intel has generated a four-year streak of beating projections.

Valuation wise, INTC certainly looks reasonably priced. The stock is trading at just 13x forward 12-month earnings, which is a steep discount to its industry’s average of 15.7x. INTC also has a PEG ratio of 1.5, so investors are clearly getting a good price for its EPS growth outlook.

 

3. Microchip Technology Incorporated (MCHP)

Microchip Technology is a manufacturer of microcontroller, memory, and analog chips. The company is a leader in several IoT-related fields, including automotive and wireless connectivity. Microchip also develops products that are secure and trusted by platforms like Alphabet’s GOOGL Google Cloud.

MCHP is another stock with strong growth potential and reasonable valuation metrics. Earnings and revenue are expected to expand by 21% and 49%, respectively, in 2018. That growth is expected to continue to the tune of 17% and 11% in 2019.

Meanwhile, MCHP has a P/E of just 14.4, which is a nice discount to its industry’s average of 20.1. The stock also has PEG of 1.0—another discount to the industry and attractive considering the extent of that growth.

 

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>


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
 
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Mellanox Technologies, Ltd. (MLNX) : Free Stock Analysis Report
 
Intel Corporation (INTC) : Free Stock Analysis Report
 
Microchip Technology Incorporated (MCHP) : Free Stock Analysis Report
 
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