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3 Semiconductor Stocks to Buy Right Now

Benjamin Rains
Sector ETF report for PSCH

Semiconductor stocks were flying high until last fall, driven by the likes of Nvidia NVDA. Since then, shares of many chip stocks have been hammered on the back of worries about the slowing Chinese economy, pricing headwinds, and more, in the historically cyclical industry.

Nvidia and firms like Advanced Micro Devices AMD face slowdowns as they try to navigate declining demand from cryptocurrency miners. Meanwhile, Micron MU looks poised to suffer from weaknesses in the PC and smartphone markets. And falling memory chip prices, which are projected to drop more than expected this year, according to some analysts, might negatively impact MU and other chip companies.

With that said, some companies’ near-term outlooks appear strong, despite some negative market conditions. Furthermore, the entire industry seems likely to remain highly valuable over the long haul as we head toward a more digitalized world.

Today, chips help power everything from video games to data centers. Semiconductor companies are also set to help drive the growth of the Internet of Things, artificial intelligence, autonomous vehicles, and much more. And it won’t just be the likes of Tesla TSLA, Apple AAPL, Microsoft MSFT, Google GOOGL, and Amazon AMZN that are likely to turn big profits and see their stocks climb as these industries expand.

These emerging tech trends have created new consumer demand, and the semiconductor makers are delivering. So, let’s check out three Zacks buy-ranked semiconductor stocks that investors might want to consider right now.

1. Xilinx, Inc. XLNX

Xilinx’s Adaptive Compute Acceleration Platform is situated to help support the expansion of everything from AI and machine vision to databases and data compression. The company’s stock price has surged over 60% in the last six months and its position in the Semiconductors – Programmable Logic industry, which currently ranks #1 out of the 255 Zacks industries, could help its climb continue. 

Xilinx posted record Q3 revenue and declared a quarterly cash dividend of $0.36 a share. Looking ahead, the company is projected to see its fiscal Q4 revenues climb nearly 23% from the year-ago quarter to reach $824.88 million, based on our current Zacks Consensus Estimate. Plus, the company’s bottom line is expected to soar roughly 47%, with double-digit top and bottom-line growth expected in Q1. XLNX has also seen a ton of positive earnings estimate revision activity for Q4 and beyond. Xilinx is currently a Zacks Rank #1 (Strong Buy) that is trading at an industry-matching 35.1X forward 12-month Zacks Consensus EPS estimates

2. Inphi Corporation IPHI

Inphi is a leader in high-speed data movement interconnects that provides semiconductor components and optical subsystems to networking OEMs, cloud and telecom service providers, and more. The Santa Clara, California-based firm is a Zacks Rank #2 (Buy) at the moment that sports a “B” grade for growth in our Style Scores system. On top of that, IPHI boasts a PEG ratio of 0.62, which falls far below its industry’s 1.57 average.

Shares of Inphi have surged over 40% in 2019 to crush the S&P 500’s comeback and help IPHI stock rest near its 52-week high. Looking ahead, Inphi’s adjusted first-quarter earnings are projected to swing from a loss of $0.05 a share to $0.28 per share, which would mark a 660% bottom-line expansion. On top of that, the company is expected to see its quarterly revenue surge by 34.7%. Meanwhile, the company’s adjusted full-year EPS figure is projected to soar over 88% on roughly 23% revenue expansion.

3. Cree, Inc. CREE

Cree is a manufacturer of LEDs and semiconductors that enhance the value of solid-state lighting, power and communications products. The company’s “SmartCast” platform enables Power over Ethernet technology and is geared toward IoT products and Smart Building platforms. CREE rocks a Zacks Rank #1 (Strong Buy) right now and a “B” grade for Growth. Plus, shares of Cree have climbed over 30% this year and touched a brand new 52-week high on Friday of $56.34 per share.

Peeking ahead, analysts expect Cree’s current fiscal year earnings, which ends in June, to skyrocket 310%. That growth is expected to continue to the tune of another 63% in the following year. Current estimates also see Cree’s revenue growth in these years reaching 10% and 11%, respectively.