Advertisement
U.S. markets open in 8 hours 34 minutes
  • S&P Futures

    5,209.00
    -5.75 (-0.11%)
     
  • Dow Futures

    39,213.00
    -10.00 (-0.03%)
     
  • Nasdaq Futures

    18,181.75
    -49.75 (-0.27%)
     
  • Russell 2000 Futures

    2,048.10
    -1.70 (-0.08%)
     
  • Crude Oil

    82.58
    -0.14 (-0.17%)
     
  • Gold

    2,163.40
    -0.90 (-0.04%)
     
  • Silver

    25.30
    +0.03 (+0.14%)
     
  • EUR/USD

    1.0873
    -0.0004 (-0.03%)
     
  • 10-Yr Bond

    4.3400
    0.0000 (0.00%)
     
  • Vix

    14.33
    -0.08 (-0.56%)
     
  • GBP/USD

    1.2717
    -0.0011 (-0.09%)
     
  • USD/JPY

    149.9730
    +0.8750 (+0.59%)
     
  • Bitcoin USD

    65,464.95
    -2,884.60 (-4.22%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,722.55
    -4.87 (-0.06%)
     
  • Nikkei 225

    39,737.34
    -3.06 (-0.01%)
     

4 Chip Stocks to Buy Despite Texas Instruments' Dull Forecast

The protracted trade war has weighed on semiconductor stocks as can be seen from Texas Instruments Incorporated’s TXN dismal third-quarter earnings report on Oct 23 and poor forecast for the next quarter. This report has instilled fear among investors that other semiconductor companies might have a similar fate.

But that isn’t the case. In fact, there are semiconductor stocks that are poised to come up with promising earnings results despite trade concerns.

Texas Instruments’ Q3 Results Discouraging

Texas Instruments' revenues fell 11.5% to $3.747 billion from $4.26 billion in the year-ago quarter.

The company’s revenues declined for the fourth time this quarter. Texas Instruments’ Analog and Embedded Processing segments incurred losses due to weakening end-market conditions. Additionally, Texas Instrument’s net income fell to $1.43 billion in the third quarter from $1.57 billion a year ago.

The trade war has weighed on semiconductor companies for long now. Rise in tariffs and blacklisting of Huawei are cited to be the reasons behind Texas Instruments’ dismal performance.

Texas Instrument’s guidance for fourth-quarter revenues has been lowered to $3.20 billion as the company is slowing down chip production and reducing the number of wafer starts until the trade war eases.

Chip Stocks to Rebound

Texas Instruments’ discouraging forecasts dragged its’ shares down by 7.5% on Oct 23 and weighed on shares of QUALCOMM Incorporated QCOM, Western Digital Corporation WDC and NXP Semiconductors N.V. NXPI that fell 1.6%, 2.1% and 4.2%, respectively.

Is this the end of chip stocks? Well, Texas Instruments is one of the first chip makers to report quarterly results and with a reputation of being the bellwether, investors are surely tensed about the results of the rest of the sector.

But there are some semiconductor companies that are unaffected by the trade war and expected to report impressive earnings results. This is because such stocks possess a positive Earnings ESP as well as a Zacks Rank #1 (Strong Buy) or 2 (Buy).

This is Zacks’ proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

4 Chip Stocks to Buy

With the rising pessimism on easing of the United States and China trade war, and positive Earnings ESP in third quarter, we are sure that the four stocks we have shortlisted will surely grow and reap profits for investors.

Advanced Energy Industries, Inc. AEIS is a publicly traded company that supplies power subsystems and process-control technologies to the semiconductor industry. The company’s expected earnings growth rate for the next year is 58.2%, above the industry’s projected rally of 38.7%. The Zacks Consensus Estimate for current-year earnings has improved 6.5% over the past 60 days.

Advanced Energy Industries flaunts a Zacks Rank #1 and has an Earnings ESP of +4.17%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Silicon Motion Technology Corporation SIMO is a publicly traded company that develops microcontroller ICs for NAND flash storage devices and specialty RF ICs for mobile devices. The company’s expected earnings growth rate for the next year is 32.4%, above the industry’s projected rally of 15%.

The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the past 60 days. Silicon Motion Technology carries a Zacks Rank #2 and has an Earnings ESPof +11.72%.

Advanced Micro Devices, Inc. AMD is a publicly traded company that provides microprocessors, chipsets, discrete graphics processing units and professional graphics. The company’s expected earnings growth rate for the current year is nearly 37%, in contrast to the industry’s decline of 0.5%. Advanced Micro Devices carries a Zacks Rank #2 and has an Earnings ESPof +6.54%.

Ambarella, Inc. AMBA is a publicly traded company that develops video compression and image processing semiconductors, which enables high-definition or HD video capture, share and display. The company’s expected earnings growth rate for the next year is 26%, above the industry’s projected rally of 15%.

The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 60 days. Ambarella carries a Zacks Rank #2 and has an Earnings ESPof +2.38%.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>


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
 
Western Digital Corporation (WDC) : Free Stock Analysis Report
 
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
 
Silicon Motion Technology Corporation (SIMO) : Free Stock Analysis Report
 
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
 
Ambarella, Inc. (AMBA) : Free Stock Analysis Report
 
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
 
NXP Semiconductors N.V. (NXPI) : Free Stock Analysis Report
 
Advanced Energy Industries, Inc. (AEIS) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

Advertisement