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3 Semiconductor Stocks to Buy Right Now

Benjamin Rains
Xylem's (XYL) strengthening end markets, shareholder-friendly policies and healthy segmental prospects are boons. High debts and forex woes remain concerns.

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 a slowing Chinese economy, among other concerns.

Last week, Nvidia saw its quarterly revenues sink 24%. Despite the downturn, shares of NVDA popped because the company had warned Wall Street of a major slowdown as it deals with declining demand from cryptocurrency miners, which has also impacted firms like Advanced Micro Devices AMD. Looking ahead, Nvidia appears to be heading for a major slowdown in 2019 in the historically cyclical semiconductor industry.

With that said, the industry will remain highly valuable within the larger tech industry as we head toward an even more digitized world. Therefore, now might be a great time to think about buying semiconductor stocks as valuations become more attractive and secular growth trends remain.

Today, chips help power everything from video games to data centers. Semiconductor companies are also poised to help drive forward 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 take a look at three Zacks buy-ranked semiconductor stocks right now that have performed rather well as of late.

1. Xilinx, Inc. XLNX

Xilinx’s Adaptive Compute Acceleration Platform is situated to help support the expansion of everything from artificial intelligence and machine vision to databases and data compression. The company’s stock price has surged 65% in the last six months and its position in the Semiconductors – Programmable Logic industry, which currently ranks #1 out of the 265 industries in our Zacks system, could help this climb continue.  

Xilinx posted record third-quarter revenue and declared a quarterly cash dividend of $0.36 a share. Looking ahead, the company is projected to see its fiscal Q4 revenues surge roughly 23% from the year-ago quarter, based on our current Zacks Consensus Estimate. Plus, the company’s bottom line is expected to soar nearly 47% and XLNX has earned a ton of positive earnings estimate revisions for Q4 and beyond. Xilinx is currently a Zacks Rank #1 (Strong Buy) that is trading at 31.8X forward 12-month Zacks Consensus EPS estimates to match its industry’s average.

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. Like Xilinx, IPHI stock has surged over 26% in the last six months to outpace its industry’s 3% average climb. The Santa Clara, California-based company is currently a Zacks Rank #2 (Buy) that rocks an industry-matching PEG ratio of 1.41.

Inphi’s adjusted first-quarter earnings are projected to swing from a loss of $0.05 a share in the prior-year quarter 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 revenues surge by 34.7%. Long-term, Inphi’s expected EPS growth rate rests at 18.5%, on an annualized basis.

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 sports a Zacks Rank #1 (Strong Buy) and has experienced gains of 21.2% in the past three months to top its broader industry’s 13% climb.

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, which means the company might not see the pullback some on Wall Street expect other semiconductors to witness in the near future.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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