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3 Semiconductor Stocks to Buy in the Fourth Quarter of 2019

Benjamin Rains

All three major U.S. indexes jumped Thursday on the back of some positive U.S.-China trade war news. This included the fact that President Trump tweeted “Big day of negotiations with China. They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House.”

The announcement came as top U.S. and Chinese officials began their meetings in Washington. Uncertainty remains, yet economic bellwether stocks like Caterpillar CAT, Intel INTC, and United Technologies UTX all climbed over 1% on Thursday.

Therefore, investors might want to look at semiconductor stocks. Chip companies will remain an integral part of the ongoing technological revolution and key to giants such as Apple AAPL, Microsoft MSFT, Google GOOGL, and countless others.

Even if a deal isn’t reached anytime soon the semiconductor industry seems sure to be a solid long-term play. With that said, we still need to look for stocks within the larger semiconductor industry that appear to be solid…

Inphi Corporation IPHI

Inphi makes semiconductor components and optical subsystems for networking original equipment manufacturers, as well as optical module, cloud computing, and telecom businesses. There is no need to get too technical, as all most investors really need to know is that the firm helps “move big data fast, around the globe, with high quality and reliability.” The Santa Clara, California-headquartered company has seen its shares soar over 93% in 2019 and nearly 100% over the last 12 months, to crush the Electronic-Semiconductors industry average of 11%.

Inphi is a Zacks Ranks #2 (Buy) at the moment that boasts an “A” grade for Growth in our Style Scores system. Our current Zacks Consensus estimates call for the company’s adjusted third-quarter earnings to pop over 23% on 15.4% stronger revenue. Better yet, IPHI’s fiscal 2019 EPS figure is projected to soar from $0.86 per share to $1.48, on 19.3% stronger sales.

This growth is then expected to continue in 2020, with its bottom-line set to climb 39% higher than our current-year estimate on 20% stronger revenue. With this in mind, investors should consider Inphi as a growth play. And IPHI stock has cooled off recently, up just 6% in the past three months, which could give it some room to run heading its Q3 earnings release.

Tokyo Electron Ltd. TOELY

Tokyo Electron is a Japanese company that manufactures semiconductor production and flat panel display production equipment. As an ADR (American depositary receipt), TOELY stock is much more lightly traded than Inphi, but it is a much larger company with a market cap of over $31 billion. Tokyo Electron also currently pays an annualized dividend of $1.23 per share for a 2.46% yield. This tops the 1.65% payout on 10-year U.S. Treasury note and looks far better since TOELY stock has surged approximately 60% in the last 52 weeks and 77% in 2019.

Chief Executive Officer Toshiki Kawai plans to continue to push his company to remain a global giant set to help drive expansion in new technologies, including virtual and augmented reality. TOELY is currently a Zacks Rank #2 (Buy) that sports “B” grades for both Value and Growth.

TOELY is trading below its industry’s average in terms of forward 12-month Zacks sales estimates. Tokyo Electron’s story clearly resonates with Wall Street at the moment, as TOELY hit another brand new 52-week high Thursday. The firm is projected to see a downturn this year, but its earnings and sales are expected to bounce back in the following fiscal period.

Micron MU

The last semiconductor stock on our list today has been one of the hottest names in the industry over the last serval years. MU’s climb was backed up by strong sales and earnings growth, which put one of the largest makers of DRAM and NAND memory chips in tough-to-compare periods. Micron has dealt with the customary ebbs and flows of the semiconductor industry, along with more company-specific chip pricing issues over the last year. The Boise, Idaho-headquartered company doesn’t appear to be out of the woods just yet in terms of year over year downturns in its actual results, but it still could be a solid long-term play.

Micron reported its Q4 fiscal 2019 results on September 26, with its FY19 revenue down 23%, after the chip company’s sales soared roughly 50% in 2018 and 64% in 2017. This fall matches MU’s 2016 revenue decline and appears to have become part of its up and down business that is tied to larger spending cycles, which has impacted the likes of AMD AMD and others.

Micron’s fiscal 2020 EPS figure is projected to fall 60% on 12.9% lower sales. Peeking further ahead, however, MU’s fiscal 2021 revenue is expected to surge 18% above our current-year estimate to reach $24.02 billion, with its adjusted earnings projected to skyrocket over 82%. Micron is Zacks Rank #3 (Hold) at the moment that holds a “B” grade for Value. MU might face a rough short-term outlook, but its revenue has counited to soar over the long haul, with downturns mixed in. And Micron shares sit 16% off their 52-week highs.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>=


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Inphi Corporation (IPHI) : Free Stock Analysis Report
 
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Tokyo Electron Ltd. (TOELY) : Free Stock Analysis Report
 
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