The semiconductor industry plays a pivotal role in propelling the digital evolution across diverse sectors. So, I think investors could consider buying quality chip stocks Amkor Technology, Inc. (AMKR), Applied Materials Inc. (AMAT), and Photronics, Inc. (PLAB) for November.
The semiconductor industry is vital in the ongoing digital transformation across various sectors. Emerging technologies such as 5G, artificial intelligence (AI), and the Internet of Things (IoT) heavily rely on semiconductor components, propelling the industry's growth.
The semiconductor market in the US is on an upward trajectory, with a projected revenue of $70.18 billion this year. Integrated Circuits play a dominant role and are expected to reach a market volume of $59.23 billion in the current year. Looking ahead, the US chip market is anticipated to expand at a CAGR of 5.7%, to reach $87.43 billion by 2027.
In addition, the global chip market is estimated to reach $607.43 billion this year. It is expected to reach $1.03 trillion by 2030 at a CAGR of 9.2%.
Furthermore, the rapidly growing smartphone market is driving a surge in demand for high-performance semiconductor chips. These advanced chips (GPUs) are at the forefront of driving innovation, ensuring that the semiconductor market remains at the cutting edge, enabling new possibilities, and meeting the ever-growing requirements of the digital age.
The global GPU market is expected to grow at over 25% CAGR from 2023 to 2032.
Considering these conducive trends, let’s look at the fundamentals of the three best Semiconductor & Wireless Chip stocks, starting with number 3.
Stock #3: Amkor Technology, Inc. (AMKR)
AMKR is a leading semiconductor packaging and test services provider, including several services, such as design, testing, and packaging for semiconductor devices. Its product line includes a variety of packages used in networking, computing, storage, mobile consumer electronics, and other fields.
On October 11, 2023, AMKR celebrated the grand opening of its newest factory in Bac Ninh, Vietnam. The facility, located within the Yen Phong 2C Industrial Park, covers 57 acres with 200,000 square meters of cleanroom space.
The facility will primarily focus on Advanced System in Package (SiP) and memory production and will provide extensive solutions for semiconductor and electronic manufacturing firms. AMKR invested $1.6 billion for the first two project phases, significantly contributing to Vietnam's economic growth, and resulting in their most advanced facility with next-generation semiconductor packaging capabilities.
On September 18, 2023, AMKR announced its inclusion in the PHLX Semiconductor Sector Index (SOX), solidifying its place among the top 30 semiconductor companies listed in the United States.
AMKR pays an annual dividend of $0.30, which translates to a yield of 1.44% on the current market price, higher than its four-year average dividend yield of 0.57%.
For the fiscal third quarter ended September 30, 2023, AMKR achieved a gross profit of $282.75 million and an operating income of $166.60 million. Net income for the quarter amounted to $133.45 million and the company reported EPS of $0.54. Additionally, the company's EBITDA reached $333 million.
Additionally, for the nine months ended September 30, AMKR’s net cash flow provided by operating activities rose 27.6% year-over-year to $696.19 million.
For the fourth quarter of 2023, AMKR expects net sales to be $1.625 billion to $1.725 billion, gross margin 14.0% to 16.0%, net income of $80 million to $120 million ($0.32 to $0.49 per diluted share), and full-year 2023 capital expenditures around $750 million.
Street expects AMKR’s revenue and EPS for the fiscal first quarter ending March 2024 to rise marginally and 27.8% year-over-year to $1.48 billion and $0.23. Moreover, the stock has surpassed the EPS and revenue estimates in three of the trailing four quarters, which is impressive.
Shares of AMKR rose marginally over the past year to close the last trading session at $20.86.
AMKR’s POWR Ratings reflect this promising outlook. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
AMKR has an A grade for Value and Momentum. Within the Semiconductor & Wireless Chip industry, it is ranked #22 out of 91 stocks.
Click here for AMKR’s additional Growth, Stability, Sentiment and Quality ratings.
Stock #2: Applied Materials Inc. (AMAT)
AMAT produces tools, services, and software for the display, semiconductor, and associated industries. Its business is divided into three main segments: Semiconductor Systems, which creates and markets tools for the fabrication of semiconductor chips; Applied Global Services, which provides services to improve fab performance and equipment; and Display and Adjacent Markets, which supply goods for the production of displays, including OLEDs and LCDs, which are used in TVs, tablets, and smartphones.
On September 7, AMAT announced a quarterly dividend of $0.32 per share payable on the company’s common stock, payable to the shareholders on December 14. The company paid dividends for 17 consecutive years.
It pays an annual dividend of $1.28, which translates to a dividend yield of 0.97% on the current share price. Its four-year average yield is 1%. AMAT’s dividend payments have grown at CAGRs of 10.5% and 14.1% over the past three and five years, respectively.
During the nine months that ended July 30, 2023, AMAT’s net sales increased 4% year-over-year to $19.79 billion. Its non-GAAP gross profit rose 3.6% from the previous-year period to $9.24 billion. The company’s non-GAAP net income increased marginally year-over-year to 5.02 billion.
In the fourth quarter of fiscal 2023, AMAT expects net sales to be approximately $6.51 billion, plus or minus $400 million. Non-GAAP adjusted EPS is expected to be in the range of $1.82 to $2.18.
Analysts expect AMAT’s revenue and EPS for the fiscal year that ended in October 2023 to grow 2.1% and 2.9% year-over-year to $26.32 billion and $7.92. The stock has surpassed the revenue and EPS estimates in each of the trailing four quarters.
The stock has soared 49.9% over the past year and 36.6% year-to-date to close the last trading session at $132.35.
AMAT’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
AMAT has an A grade for Momentum and a B grade for Quality. Within the same industry, it is ranked #10.
In addition to the POWR Ratings stated above, one can see AMAT’s additional POWR Ratings for Growth, Value, Stability and Sentiment here.
Stock #1: Photronics, Inc. (PLAB)
PLAB is a multinational corporation that specializes in producing and marketing photomask goods and services. Serving a diverse clientele spanning multiple global regions, the company provides services to semiconductor and FPD manufacturers, designers, foundries, and high-performance electronics manufacturers.
In the fiscal third quarter that ended July 30, 2023, PLAB reported revenue of $224.21 million, up 1.9% year-over-year. The company’s gross profit rose 3.5% year-over-year to $86.80 million and non-GAAP EPS came in at $0.51, representing an increase of 8.5% year-over-year. Moreover, its non-GAAP net income increased 9.7% year-over-year to $31.64 million.
For the fourth quarter of fiscal 2023, PLAB expects revenue to be between $222 million and $232 million and non-GAAP net income attributable to PLAB shareholders to be between $0.51 and $0.59 per share.
Street expects PLAB ’s revenue for the fiscal fourth quarter that ended October 2023 to grow 6.5% from the previous-year quarter to $224 million and its EPS is expected to be $0.53 in the same quarter. The company has exceeded the revenue estimates in three of the trailing four quarters.
The stock has soared 13.2% over the past year to close the last trading session at $18.36.
PLAB’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
PLAB has an A grade for Momentum and a B for Value and Quality. Within the Semiconductor & Wireless Chip industry, it is ranked #6.
To see PLAB’s additional POWR Ratings for Growth, Stability, and Sentiment click here.
What To Do Next?
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AMAT shares were trading at $133.08 per share on Wednesday morning, up $0.73 (+0.55%). Year-to-date, AMAT has gained 37.63%, versus a 11.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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