In this article, we will discuss the 10 best cheap semiconductor stocks to buy and hold. If you want to explore similar semiconductor stocks that promise long-term gains, you can also take a look at 5 Best Cheap Semiconductor Stocks to Buy and Hold.
The Global Chipmaking Industry Poised to Grow at 14% Clip
According to World Semiconductor Trade Statistics’ (WSTS) market forecast, the global semiconductor market is expected to grow by 13.9% year-over-year in 2022, and by an additional 4.6% in 2023. The global semiconductor industry registered strong growth in 2021, expanding by 26.2% year-over-year. WSTS expects the global semiconductor industry to hit a valuation of $633 billion in 2022, and $662 billion by 2023. The logic category is expected to grow by 24.1% year-over-year in 2022, while sensor growth is expected to register a 16.6% year-over-year rise.
Region-wise, the semiconductor market is expected to grow aggressively in the Americas region, at a rate of 23.5% year-over-year, followed by Japan’s market growing by 14.2% year-over-year. Other strong growth regions for the industry are expected to be Europe, registering a year-over-year growth rate of 14%, and the Asia Pacific region, estimated to grow by 10.5% year-over-year in 2022.
From Shortage to Glut and Demand Weakness
While the future of the semiconductor industry seems bright, it is faced with major headwinds in 2022 and into 2023. First, there was a global chip shortage in 2021, which later turned into an inventory glut as manufacturers stockpiled chips in a panic. Fed tightening and skyrocketing inflation have hampered the otherwise strong growth trajectory of the global semiconductor industry. As higher prices take away consumers’ purchasing power and individuals postpone buying a new car or electronic device, which are two of the biggest end markets of the semiconductor industry, semiconductor stocks are expected to dip further. Research firm Gartner expects global PC shipments to decline at a pace of 9.5% in 2022 and smartphone shipments to fall by 7.1% by the end of the year.
Semiconductor stocks are getting hammered in 2022, with industry-leading chipmakers like Lam Research Corporation (NASDAQ:LRCX), Applied Materials, Inc. (NASDAQ:AMAT), and Micron Technology, Inc. (NASDAQ:MU) losing more than 35% of their value year-to-date as of August 29. While this is troubling news for investors who are in the stock market to make a quick buck, for investors that are looking to reap long-term returns, now is an attractive entry point, with some of the best semiconductor companies trading at bargain levels.
Photo by Slejven Djurakovic on Unsplash
Our Methodology
To determine the 10 best cheap semiconductor stocks to buy and hold, we did a careful analysis of the global semiconductor industry. We identified chipmakers that had powerful end markets, such as 5G technology, the server market, and data centers, and the potential to gain further market share in those respective markets. We narrowed down our selection to stocks that were trading at a price-to-earnings multiple of less than 15x.
Along with each stock, we have mentioned the hedge fund sentiment, analyst ratings, relevant growth catalysts, and other salient features which make the stock a strong candidate for the long-term investor. We have ranked our picks in ascending order based on the number of hedge fund shareholders from among the select group of funds tracked by Insider Monkey’s database.
10 Best Cheap Semiconductor Stocks to Buy and Hold
10. Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL)
PE Ratio as of August 29: 2.66
Number of Hedge Fund Holders: 16
Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) designs, manufactures, and sells semiconductors for use in computing, consumer electronics, communication, and industrial applications in the United States and internationally. As of August 29, Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) has gained 45.1% over the past 12 months and is trading at a PE multiple of 2.66x.
On August 10, Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) announced its earnings results for the fourth quarter of its fiscal 2022. The company reported earnings per share of $0.53 and revenue of $194 million, the latter up 9.39% year-over-year, and ahead of Wall Street’s consensus by $3.96 million. Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) also announced that for the first quarter of fiscal 2023, it anticipates revenue of $210 million, plus or minus $3 million, in line with market expectations of $210 million.
On August 11, Benchmark analyst David Williams raised his price target on Alpha & Omega Semiconductor Ltd (NASDAQ:AOSL) to $60 from $70 and maintained a ‘Buy’ rating on the shares.
At the close of the second quarter of 2022, 16 hedge funds held stakes in Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), the total value of which amounted to $40.6 million. Of those funds, Renaissance Technologies was the top shareholder in the company, having a stake worth $11 million as of June 30.
Like Lam Research Corporation (NASDAQ:LRCX), Applied Materials, Inc. (NASDAQ:AMAT), and Micron Technology, Inc. (NASDAQ:MU), Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) is a semiconductor stock with long-term growth potential.
9. STMicroelectronics N.V. (NYSE:STM)
PE Ratio as of August 29: 11.81
Number of Hedge Fund Holders: 18
STMicroelectronics N.V. (NYSE:STM) designs, manufactures, and sells semiconductors in Europe, the Middle East, Africa, the Americas, and the Asia Pacific. On July 28, STMicroelectronics N.V. (NYSE:STM) announced second quarter earnings per share of $0.92, beating estimates by $0.12. The company’s revenue for the quarter came in at $3.84 billion, up 28.24% year-over-year, and beating expectations by $81.7 million.
STMicroelectronics N.V. (NYSE:STM) also raised its FY22 guidance, with the firm now expecting revenue of between $15.9 billion and $16.2 billion, up from its prior revenue view of between $14.8 billion and $15.3 billion. Wall Street analysts expect the company to generate revenue of $14.99 billion for the year.
On August 1, Citi analyst Andrew Gardiner raised his price target on STMicroelectronics N.V. (NYSE:STM) to EUR 52 from EUR 44 and maintained a ‘Buy’ rating on the shares.
On August 9, STMicroelectronics N.V. (NYSE:STM) launched version 4.20 of the company’s TouchGFX user-interface design software for the STM32 microcontrollers.
At the end of the second quarter of 2022, 18 hedge funds held stakes in STMicroelectronics N.V. (NYSE:STM) worth $248 million, compared to 19 positions in the previous quarter worth $198 million. As of June 30, Woodline Partners owns 3.17 million shares of STMicroelectronics N.V. (NYSE:STM) and is the largest shareholder in the company. The fund’s stakes was valued at $99.8 million.
8. Amkor Technology, Inc. (NASDAQ:AMKR)
PE Ratio as of August 29: 7.45
Number of Hedge Fund Holders: 20
Amkor Technology, Inc. (NASDAQ:AMKR) provides semiconductor packaging and testing services in the United States, Japan, Europe, the Middle East, Africa, and the Asia Pacific. On June 29, DA Davidson analyst Thomas Diffely initiated coverage of Amkor Technology, Inc. (NASDAQ:AMKR) with a ‘Buy’ rating and a $30 price target.
On August 1, Amkor Technology, Inc. (NASDAQ:AMKR) announced second quarter earnings per share of $0.51, which beat expectations by $0.03. The company’s revenue for the quarter amounted to $1.50 billion, up 6.99% year-over-year. The company sees third quarter revenue in a range between $1.88 billion and $1.98 billion, while analysts expect the company to deliver revenue of $1.79 billion.
As of August 29, Amkor Technology, Inc. (NASDAQ:AMKR) shares are trading at a PE multiple of 7.45-times earnings and offer a forward dividend yield of 0.94%, which the company supports with trailing twelve-month free cash flow of $281 million.
At the close of Q2 2022, 20 hedge funds were long Amkor Technology, Inc. (NASDAQ:AMKR) with stakes worth $175 million. Of those, SW Investment Management was the most prominent shareholder, with a position worth $57.7 million as of June 30.
7. Qorvo, Inc. (NASDAQ:QRVO)
PE Ratio as of August 29: 13.90
Number of Hedge Fund Holders: 30
Qorvo, Inc. (NASDAQ:QRVO) designs and manufactures radio-frequency systems for wireless and broadband communication applications. The company also provides foundry services. On August 3, Qorvo, Inc. (NASDAQ:QRVO) announced market-beating earnings for the first quarter of its fiscal 2023. The company reported earnings per share of $2.25 to beat estimates by $0.13. The company’s revenue for the quarter came in at $1.04 billion, ahead of the consensus by $6.76 million.
In August, Qorvo, Inc. (NASDAQ:QRVO) launched a 100-watt L-band compact solution, a GaN-on-SiC power amplifier module for use in commercial and defense radar applications. It is one of the highest gain amplifier solutions on the market, offering 60% power efficiency and a circuit size that is 70% more compact.
On August 4, JPMorgan analyst Harlan Sur hiked his price target on Qorvo, Inc. (NASDAQ:QRVO) to $125 from $140 and maintained a buy-side ‘Overweight’ rating on the shares. The analyst noted that the company’s risk/reward ratio at its current valuation is compelling.
At the end of the second quarter of 2022, 30 hedge funds held stakes in Qorvo, Inc. (NASDAQ:QRVO) worth $1.17 billion. As of June 30, Baupost Group is the dominating shareholder in the company with a position worth $657 million.
Here is what investment management firm Vulcan Value Partners had to say about Qorvo, Inc. (NASDAQ:QRVO) in its first-quarter 2022 investor letter:
“Qorvo Inc. is one of the two major providers of radio frequency RF systems which are critical components of mobile devices including smart phones and the Internet of Things (IoT). Two transitory concerns have recently affected the company’s stock price. First, supply chain issues continue to be a constraint. Second, Apple recently announced its decision to decrease production of its iPhone SE model. Neither of these issues threatens their long-term competitive position. Qorvo’s value is stable and despite the recent pressure on the stock price, we feel its long-term prospects are promising.”
6. Skyworks Solutions, Inc. (NASDAQ:SWKS)
PE Ratio as of August 29: 12.99
Number of Hedge Fund Holders: 40
Skyworks Solutions, Inc. (NASDAQ:SWKS) is a leading American semiconductor manufacturer. The company’s primary end markets are Radio Frequency and mobile communications systems. One of the company’s largest clients is computer giant Apple, Inc. (NASDAQ:AAPL). On August 5, BMO Capital analyst Ambrish Srivastava raised his price target on Skyworks Solutions, Inc. (NASDAQ:SWKS) to $135 from $120 and reiterated a buy-side ‘Outperform’ rating on the shares.
On August 4, Skyworks Solutions, Inc. (NASDAQ:SWKS) declared a quarterly cash dividend of $0.62 per share, up 10.7% from its prior dividend of $0.56. The common stock cash dividend is payable on September 15 to shareholders of record on August 25. As of August 29, the stock has a trailing twelve-month PE ratio of 12.99x and offers a forward dividend yield of 2.37%, which the company supports with free cash flow of $953 million.
At the end of the first quarter of 2022, 40 hedge funds were long Skyworks Solutions, Inc. (NASDAQ:SWKS) with stakes worth $1.04 billion. This is compared to 39 positions in the preceding quarter worth $781 million. As of June 30, Millennium Management is the largest shareholder in Skyworks Solutions, Inc. (NASDAQ:SWKS), owning roughly 1.60 million shares of the company. The investment covers 0.09% of Israel Englander’s 13F portfolio.
Semiconductor stocks that are currently trading at bargain levels include Skyworks Solutions, Inc. (NASDAQ:SWKS), Lam Research Corporation (NASDAQ:LRCX), Applied Materials, Inc. (NASDAQ:AMAT), and Micron Technology, Inc. (NASDAQ:MU).
Click to continue reading and see the 5 Best Cheap Semiconductor Stocks to Buy and Hold.
Suggested Articles:
- 12 Best Semiconductor Stocks To Invest In Right Now
- 10 Best Semiconductor Stocks to Buy for 2022
- 10 Cheap Semiconductor Stocks to Invest In Today
Disclosure. None. 10 Best Cheap Semiconductor Stocks to Buy and Hold is originally published on Insider Monkey.
