In this article, we will take a look at the 10 cheap semiconductor stocks to buy now. If you want to explore similar stocks, you can also take a look at 5 Cheap Semiconductor Stocks To Buy Now.
The semiconductor industry is highly cyclical, meaning that demand for semiconductor products fluctuates in regular intervals. This is due to the fact that semiconductor products are closely tied to the broader technology industry, which also experiences cyclicality. Demand for semiconductor products tends to rise when the overall economy is doing well, as businesses and consumers purchase more technology products. On the other hand, when the economy is in a recession, semiconductor demand tends to fall.
The semiconductor industry has had its fair share of volatility. First was a global shortage amid the Covid-19 pandemic, triggered by increased consumer spending on personal computers and devices as consumers were forced to stay indoors. The shortage turned into a glut as manufacturers hoarded chips, we did a piece about this. You can go to 10 Semiconductor Stocks to Watch as Shortage Turns to Glut if you want to read about that.
Global Semiconductor Revenue to Go Down by 3.6% in 2023
According to a report by Gartner, the worldwide semiconductor revenue is on track to go down by 3.6% in 2023 and amount to $596 billion, down from $618 billion in 2022. The Vice President of Gartner, Richard Gordon, said:
“The short-term outlook for semiconductor revenue has worsened. Rapid deterioration in the global economy and weakening consumer demand will negatively impact the semiconductor market in 2023.”
Moreover, memory revenue is expected to decline by 16.2% in 2023. This is driven by demand destruction for PCs, smartphones, and consumer electronics, and an oversupply of chips in these markets.
Wedbush Analyst Bullish on Semiconductor Stocks
On December 23, Wedbush Securities’ analyst, Matt Bryson, appeared in an interview on TD Ameritrade Network where he gave his take on the situation of the semiconductor sector and what he sees for the space moving forward. According to Matt Bryson, semiconductor companies’ margins have suffered because “there’s too much inventory out there, there’s still too much supply, and this is what happens when there’s not enough demand”. However, Matt Bryson sees an uptick in semiconductor performance soon. Here are some comments from the analyst:
“The last three, four years, we’ve seen these mini cycles where you really haven’t seen substantial oversupply or substantial undersupply and so earning and margins have held within a relatively narrow range, at least in the history of memory. This looks a lot more like the cycles we saw prior to the last three, four years, where you get substantial oversupply. What ends up happening is the memory companies over correct and so they reduce production, reduce forward Capex and forward production capacity, and then a couple of things happen. One, demand for memory continues to grow, while I believe will happen this time around. Two, as pricing comes down, because the product is cheaper, you see content per device go up. So, PCs start using more memory, servers start using more memory. That’s always a little bit unexpected, and what ends up happening is, in some period of time, you end up with not enough supply. And so we see the exact reverse happen of the downtick we just saw. You get an uptrend in pricing, it all flows through into revenue and margins, and all of a sudden earnings look really good.”
2022 has been a bad year for stocks, especially growth stocks which include semiconductor stocks. As of January 3, the Nasdaq Composite has shed over a third of its value since the beginning of 2022. However, this massive pullback has caused certain leading names in the semiconductor space to drop to bargain levels. In this piece, we will talk about some of the best cheap semiconductor stocks that investors can buy into weakness. Some of the best semiconductor stocks that are currently presenting an attractive buying opportunity include leading names like Micron Technology, Inc. (NASDAQ:MU), QUALCOMM, Incorporated (NASDAQ:QCOM), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM).
Photo by Yogesh Phuyal on Unsplash
Our Methodology
We screened for leading semiconductor companies that have pulled back significantly in 2022 and are currently trading at a price-to-earnings multiple of less than 15. We narrowed down our selection to companies with positive market sentiment and included the analyst ratings and hedge fund sentiment with each of our picks. We have ranked these stocks according to their popularity among elite money managers, from least to most.
10 Cheap Semiconductor Stocks To Buy Now
10. Diodes Incorporated (NASDAQ:DIOD)
PE Ratio as of January 3: 11.51
Number of Hedge Fund Holders: 18
Diodes Incorporated (NASDAQ:DIOD) is a leading global manufacturer of discrete semiconductor products. The company designs and manufactures a variety of products including diodes, rectifiers, transistors, MOSFETs, voltage regulators, and protection devices. Shares of Diodes Incorporated (NASDAQ:DIOD) have pulled back significantly and the stock is trading at a PE multiple of 11.51, as of January 3. The stock is placed on our list of the cheap semiconductor stocks to buy now.
On November 8, Benchmark analyst David Williams revised his price target on Diodes Incorporated (NASDAQ:DIOD) to $90 from $105 and maintained a Buy rating on the shares.
18 hedge funds were long Diodes Incorporated (NASDAQ:DIOD) at the end of Q3 2022. The total stakes of these hedge funds amounted to $67.6 million. As of September 30, Fisher Asset Management is the largest investor in the company and has disclosed a position worth $18.1 million.
Some of the key players in the semiconductor space that are trading at an attractive valuation include Micron Technology, Inc. (NASDAQ:MU), QUALCOMM, Incorporated (NASDAQ:QCOM), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM).
9. STMicroelectronics N.V. (NYSE:STM)
PE Ratio as of January 3: 9.66
Number of Hedge Fund Holders: 19
STMicroelectronics N.V. (NYSE:STM) is a global semiconductor leader based in Switzerland. The company’s products are found everywhere, from the cloud and devices to automotive and consumer applications. At the end of Q3 2022, 19 hedge funds disclosed positions in STMicroelectronics N.V. (NYSE:STM) worth $351.5 million.
On December 7, STMicroelectronics N.V. (NYSE:STM) announced the availability of the company’s new silicon-carbide power modules for electric vehicles which will boost both performance and driving range. On December 12, Susquehanna analyst Christopher Rolland took coverage of STMicroelectronics with a Positive rating and a $50 price target.
STMicroelectronics N.V. (NYSE:STM) is currently trading at bargain levels and is one of the best cheap semiconductor stocks to buy now. As of January 3, the stock is trading at a PE multiple of 9x.
As of September 30, Millennium Management is the most prominent shareholder in STMicroelectronics N.V. (NYSE:STM) and has a position worth $72.45 million in the company.
8. Amkor Technology, Inc. (NASDAQ:AMKR)
PE Ratio as of January 3: 7.21
Number of Hedge Fund Holders: 24
Amkor Technology, Inc. (NASDAQ:AMKR) provides outsourced semiconductor assembly and test services. The company provides outsourced assembly and testing services to the world’s leading electronics manufacturers, focusing on providing a wide range of chip packaging, test, and system services. These services include wafer bumping, wafer probing, packaging, and testing.
Amkor Technology, Inc. (NASDAQ:AMKR) is one of the cheap semiconductor stocks to buy now that is also awarding shareholders with dividends. As of January 3, the stock is trading at a PE ratio of 7.21 and is offering a forward dividend yield of 1.25%. Moreover, according to the company’s balance sheet, Amkor Technology, Inc. (NASDAQ:AMKR) has free cash flows of $171.5 million.
At the close of the third quarter of 2022, Amkor Technology, Inc. (NASDAQ:AMKR) was spotted on 24 investors’ portfolios that held collective positions worth $118.1 million in the company. Of those, SW Investment Management was the top shareholder in the company and held a stake worth $51.15 million.
7. Semtech Corporation (NASDAQ:SMTC)
PE Ratio as of January 3: 12.56
Number of Hedge Fund Holders: 28
Semtech Corporation (NASDAQ:SMTC) ranks 7th on our list of the cheap semiconductor stocks to buy. SMTC is a leading global supplier of analog and mixed-signal semiconductors and advanced algorithms. The company provides products for industrial, automotive, communications, computer, medical, and consumer markets. On November 30, Piper Sandler analyst Harsh Kumar revised his price target on Semtech Corporation (NASDAQ:SMTC) to $45 from $60 and reiterated an Overweight rating on the shares.
On November 30, Semtech Corporation (NASDAQ:SMTC) posted earnings for the fiscal third quarter of 2022. The company reported an EPS of $0.65 and outperformed consensus by $0.02. The company’s revenue for the quarter amounted to $177.62 million and was ahead of Wall Street estimates by $2.13 million. As of January 3, Semtech Corporation (NASDAQ:SMTC) has a trailing twelve-month PE ratio of 12.56. The stock is one of the best cheap semiconductor stocks to buy now.
Semtech Corporation (NASDAQ:SMTC) was held by 28 hedge funds at the end of the third quarter of 2022. These funds held collective positions worth $263.15 million in the company. As of September 30, Ken Fisher’s Fisher Asset Management is the top investor in Semtech Corporation (NASDAQ:SMTC) and has a position worth $38.3 million.
Here is what Carillon Tower Advisers had to say about Semtech Corporation (NASDAQ:SMTC) in its third-quarter 2022 investor letter:
“Semtech Corporation (NASDAQ:SMTC) makes mixed-signal and analog semiconductors used across end markets that include computing, communications, and the “Internet of Things” (IoT). The stock sold off significantly after Semtech announced that it plans to acquire an IoT solutions provider in a deal that is expected to add significant scale benefits to the company but also to create a meaningful drag on its margin profile.”
6. Qorvo, Inc. (NASDAQ:QRVO)
PE Ratio as of January 3: 14.23
Number of Hedge Fund Holders: 35
Qorvo, Inc. (NASDAQ:QRVO) is a provider of innovative RF solutions that enable the world’s most advanced mobile, infrastructure, and defense applications. Shares of Qorvo, Inc. (NASDAQ:QRVO) have pulled back and have created an attractive buying opportunity for investors. The stock is trading at a PE multiple of 14x, as of January 3, and is placed sixth on our list of the best cheap semiconductor stocks to buy now.
Wall Street is bullish on Qorvo, Inc. (NASDAQ:QRVO). On November 15, Credit Suisse analyst Chris Caso started coverage of Qorvo, Inc. (NASDAQ:QRVO) with an Outperform rating and a $120 price target.
At the close of Q3 2022, Qorvo, Inc. (NASDAQ:QRVO) was a part of 35 investors’ portfolios that disclosed collective positions worth $1.17 billion in the company. Of those, Seth Klarman’s Baupost Group was the leading shareholder in the company and disclosed a position worth $538 million.
In addition to Qorvo, Inc. (NASDAQ:QRVO), other semiconductor stocks that are popular among elite hedge funds include Micron Technology, Inc. (NASDAQ:MU), QUALCOMM, Incorporated (NASDAQ:QCOM), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM).
Click to continue reading and see 5 Cheap Semiconductor Stocks To Buy Now.
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Disclosure: None. 10 Cheap Semiconductor Stocks To Buy Now is originally published on Insider Monkey.