For Immediate Release
Chicago, IL – October 8, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Keysight Technologies KEYS, Taiwan Semiconductor Manufacturing Company Ltd. TSM, Synopsys SNPS and Cadence Design Systems CDNS.
Here are highlights from Wednesday’s Analyst Blog:
Stocks Poised to Gain from Uptick in Chip Design Activity
According to the latest data from the Semiconductor Industry Association (SIA), worldwide sales of semiconductors increased 4.9% in August on a year-over-year basis to $36.2 billion. Further, sales in August were 3.6% higher than the July total of $35 billion. Moreover, sales into the Americas remained strong in August, reflecting an increase of 23.6% year over year.
Microchip demand is also likely to get a boost with the 5G boom in Europe and parts of Asia, including China and Singapore. IDC expects 5G volumes to grow this year, which should act as a tailwind to the semiconductor market.
In fact, per World Semiconductor Trade Statistics data, worldwide sales of semiconductors are projected to hit $426 billion in 2020, reflecting a year-over-year improvement of 3.3%. Also, the global semiconductor market is projected to grow 6.2% in 2021.
Factors Driving the Need to Design Robust Chips
The projected increase in semiconductor sales authenticate the momentum in chip design activity. Markedly, the global semiconductor industry, which plays a crucial role in the high-growth technology space, has been relatively less battered by the coronavirus pandemic.
As economies reopen; increasing proliferation of IoT devices, including sensors, smart devices and proximity awareness applications, to aid people resume work, school, and other activities amid the social distancing norms, remains noteworthy. This, in turn, will further boost the need to design robust chips to meet the evolving standards.
Amid the backdrop of the 5G and cloud computing boom induced by the new normal lifestyle, semiconductor manufacturers are looking to design AI-embedded robust inference chips. Growing clout of high-speed networking, smartphone processors, and high-performance data center applications, further enhances the necessity to deliver advanced chips.
These factors are driving the demand for electronic design automation (EDA) software, simulation software, electronic design, test instrumentation systems, 5G network emulation solutions, and semiconductor device fabrication process offerings.
Moreover, momentum in high performance computing (HPC) applications, gaming, wearables, drones and VR/AR devices is fueling massive growth in the semiconductor space. This can primarily be attributed to the coronavirus crisis, which has led to increase in usage of online services globally.
Further, evolution of semiconductor manufacturing processes from 10 nanometer (nm) to 7 nm and even 5 nm technology is opening new business avenues.
This brings our focus to five stocks that are well positioned to gain in the current scenario:
Advanced Energy Industries is benefiting from strong momentum across semiconductor equipment, and data center verticals.
Particularly, solid demand for the company’s power solutions in advanced semiconductor applications, is driving its semiconductor product revenues. Moreover, increasing investments in complex 3D NAND devices, DRAM, and foundry and logic remains a tailwind for this Zacks Rank #1 (Strong Buy) company. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for current-year earnings has been revised upward by 7.7% in the past 30 days to $4.33 per share.
Keysight Technologies is gaining from strong presence in the 5G network emulation market. Collaborations with Qualcomm, Xilinx and AT&T, and notable acquisitions including Ixia, Anite and AT4 Wireless have enhanced Keysight’s 5G test solutions portfolio.
The company is well poised to gain from solid demand for its semiconductor measurement solutions as semiconductor companies look to develop chips based on next-generation process technologies.
Also, improving supply chain management, uptick in 5G chip design solutions on accelerated 5G deployment, and demand recovery across Asia boosts the company’s business prospects.
Notably, the Zacks Consensus Estimate for fiscal 2020 earnings has been revised upward by 12.2% in the past 60 days to $4.70 per share. Keysight currently carries a Zacks Rank #2.
Taiwan Semiconductor Manufacturing Company Ltd., the world's largest dedicated integrated circuit foundry, is well poised to capitalize on the 5G boom on strength in its robust 7 nm and 5 nm production processes.
Momentum in new 5G smartphone launches, persuaded the company to raise the outlook for 5G smartphone penetration rate to high teens in 2020. The company, currently carrying a Zacks Rank #3 (Hold), anticipates solid uptick in 5G and HPC related applications to bolster semiconductor content enrichment through 2020.
The consensus mark for current-year earnings of $3.14 per share indicates growth of 46.1% on a year-over-year basis.
Synopsys is benefiting from robust growth in software-based verification at both traditional semiconductor and emerging system companies focused on own in-house design.
Notably, Fusion Design Platform, launched last November, is witnessing high demand, which is helping it drive robust results. The company’s Verification Continuum platform steadily witnesses excellent demand and competitive wins. Further, ZeBu Server 4 product is generating a broad-based adoption by customers’ designing storage, networking and AI chips.
The company, currently carrying a Zacks Rank #3, also announced the acquisition of Qualtera, a provider of collaborative high-performance, big data analytics for semiconductor test and manufacturing, to address the momentum in the semiconductor end-market.
The consensus mark for fiscal 2020 earnings has been revised upward by 5.3% to $5.55 per share in the past 60 days.
Cadence Design Systems continues to invest heavily in verification and digital design products, which is helping it to launch products that address the ever-growing needs of semiconductor companies. It is focusing on providing end-to-end solutions, which rapidly reduces the time required to introduce a semiconductor product in the market.
We believe that the launch of new products like Protium X1, Spectre X, Smart JasperGold and Tensilica Vision Q7 and Xcelium, which have already been selected by new customers like NVIDIA, Xilinx and Mellanox (now acquired by NVIDIA), will drive the top line.
Further, Cadence has expanded its partnership with Micron to ramp up the development of the latter’s next-gen products. Solid adoption of Palladium Z1 on the back of strong demand for growing hardware capacity remains a positive for this Zacks Rank #3 company.
The consensus mark for 2020 earnings of $2.55 per share indicates growth of 15.9% on a year-over-year basis.
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