Analysts expect the ongoing global semiconductor shortage to continue in 2022 due to strong demand for electronics, electric vehicles (EVs), and other products. However, the semiconductor supply is expected to improve beginning in mid-2022 as…
industry leaders expand their production capacities as new factories, which are currently under construction, become operational. Experts predict the industry to grow in the range of 15%-20% over the next three to five years.
The U.S. government has been taking steps to boost domestic semiconductor production capacity to make the U.S. globally competitive. Though the U.S. Innovation and Competition Act, which contains the CHIPS Act, is currently stalled in the House of Representatives, U.S. Commerce Secretary Gina Raimondo has urged the House to pass the legislation immediately.
Demand for semiconductors is expected to rise over time given the rapid digitization of virtually all industries. Thus, we think renowned semiconductor stocks Analog Devices, Inc. (ADI), Lam Research Corporation (LRCX), and KLA Corporation (KLAC) could be solid bets now.
Click here to checkout our Semiconductor Industry Report for 2021
Analog Devices, Inc. (ADI)
Norwood, Mass.-based ADI manufactures Integrated circuits (ICs), software, and subsystems that convert real-world analog signals to digital data. It also provides power management and microelectromechanical systems technology solutions. The company serves clients in industrial, automotive, consumer, and communications markets in the Americas, Europe, and Asia.
On October 5, ADI completed its inaugural sustainability-linked bond offering to raise $750 million. The proceeds from this offering are expected to be used to integrate environmentally sustainable production methods to reduce its overall carbon footprint. It was the first U.S. technology company to deploy three sustainable finance instruments as of October 5, 2021.
ADI’s net sales increased by 53% year-over-year to $2.34 billion in its fiscal fourth quarter, ended October 31, 2021. Its adjusted gross margin increased 90 basis points from its year-ago value to 70.9%. And its adjusted operating income came in at $1 billion, up 59% from the same period last year. Its Adjusted EPS increased 20% from its year-ago value to $1.73.
A $1.79 consensus EPS estimate for its fiscal year 2022 first quarter (ending January 2022) represents a 24% year-over-year improvement. The $2.61 billion consensus revenue estimate for the current quarter indicates a 67.2% increase from the same period last year. The company has an impressive earnings surprise history also; it beat the Street’s EPS estimates in each of the trailing four quarters.
The stock has gained 29.6% in price over the past year to close yesterday’s trading session at $180.25.
Under POWR Ratings, ADI has been accorded an A rating for Momentum. Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #71 of 101 stocks.
To see additional POWR Ratings for Growth, Stability, and Quality for ADI, click here.
Lam Research Corporation (LRCX)
LRCX manufactures semiconductor processing and wafer fabrication services and equipment globally. The Fremont, Calif.-based company sells its products and services to semiconductor and integrated device manufacturers globally. It has an ISS Governance QualityScore of 1, indicating relatively low governance risk.
On November 30, LRCX was named as a member of the Dow Jones Sustainability Index for North America for the first time. It is one of the top 30 sustainability performers among the 600 largest companies based in the United States and Canada. This highlights the efforts and progress that LRCX has made in its environmental, social, and governance (ESG) initiatives. LRCX aims to operate on 100% renewable energy by 2030 and reduce its carbon footprint to net-zero by 2050.
The company opened a new semiconductor manufacturing facility in Oregon in September. In the prior month…
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