As one of the popular players in the semiconductor space, the shares of Santa Clara, Calif.-based Advanced Micro Devices, Inc (AMD) have gained 36.9% in price over the past three months to close…
yesterday’s trading session at $107.27, after hitting their $122.49, 52-week high. The company recently launched its AMD Radeon RX 6600 XT graphics card, which is designed to deliver the ultimate high-framerate, high-fidelity, and highly responsive 1080p gaming experience.
However, AMD’s trailing-12-month gross profit margin and CAPEX/Sales are 45.71% and 2.08%, respectively, compared unfavorably with the 49.04% and 2.28% industry averages. Moreover, the stock is currently trading at an expensive valuation. In terms of forward Price-to-Book ratio, AMD’s 15.39x is 156.3% higher than the 6x industry average. In addition, the stock’s 8.33x forward P/S is 103.2% higher than the 4.10x industry average. So, it’s wise to wait for a better entry point in the stock.
Nevertheless, the industry looks attractive right currently. Because the governments of several countries are investing heavily to address the semiconductor chip shortage, prominent players in this space should benefit from the rising demand for semiconductors from several industries. According to a SpendEdge report, the global semiconductor market will grow at a 6.8% CAGR from 2021 – 2025.
So, we think it is better to stay away from AMD right now and bet on semiconductor stocks Applied Materials, Inc. (AMAT – Get Rating), Lam Research Corporation (LRCX – Get Rating), and Analog Devices, Inc. (ADI – Get Rating) instead. They are expected to continue thriving in the coming quarters.
Click here to checkout our Semiconductor Industry Report for 2021
Applied Materials, Inc. (AMAT – Get Rating)
AMAT provides manufacturing equipment, services, and software to the semiconductor, display, and related industries. It operates through three segments: Semiconductor Systems; Applied Global Services; and Display and Adjacent Markets. AMAT is headquartered in Santa Clara, Calif.
On August 20, 2021, Gary Dickerson, the company’s President, and CEO said, “Applied has the broadest and most enabling portfolio of technologies to accelerate our customers’ roadmaps, putting us in a great position to outperform our markets again in 2021 and the years ahead.”
The company’s net sales increased 41% year-over-year to $6.20 billion for its fiscal third quarter, ended August 1, 2021. Its adjusted operating income grew 74.9% year-over-year to $2.03 billion, while its adjusted net income increased 78% year-over-year to $1.74 billion. Also, its adjusted EPS came in at $1.90, up 79% year-over-year.
AMAT’s EPS and revenue are expected to increase 57.8% and 32.3%, respectively, year-over-year to $6.58 and $22.76 billion in its fiscal year 2021. In addition, it surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 107.8% in price over the past year to close yesterday’s trading session at $132.49.
AMAT’s POWR Ratings reflect solid prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. It has a B grade for Momentum and Quality.
Click here to see AMAT’s ratings for Growth, Stability, Value, and Sentiment as well. AMAT is ranked #46 of 99 stocks in the B-rated Semiconductor & Wireless Chip industry.
Lam Research Corporation (LRCX – Get Rating)
LRCX designs, manufactures, markets, refurbishes, and services semiconductor processing equipment to fabricate integrated circuits. The Freemont, Calif., company offers ALTUS systems, SABRE electrochemical deposition products, SOLA ultraviolet thermal processing products, and VECTOR plasma-enhanced CVD ALD products.
LRCX announced the expansion of its global manufacturing capacity on…
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