In this article, we discuss 5 best small-cap semiconductor stocks to buy now. To read the detailed analysis of the semiconductor market, go directly to 10 Best Small-Cap Semiconductor Stocks to Buy Now.
5. indie Semiconductor, Inc. (NASDAQ:INDI)
Market Cap as of September 22: $919.43 million
indie Semiconductor, Inc. (NASDAQ:INDI) is an American semiconductor and equipment manufacturer. indie Semiconductor, Inc. (NASDAQ:INDI) has been exceeding the market expectation and targets in the past few quarters due to its design line of Lidar, radar, ultrasound, and computer vision in addition to wireless charging, advanced lighting, and power management. The company’s Q4 2021, Q1 2022, and Q2 2022 revenues surged up by 185%, 165%, and 181%, respectively. Due to the market transitioning to EVs, the company saw massive growth in the first half of the year, despite US auto sales dropping by 17%. The silicon content in autos is expected to grow from $500 per vehicle to $7000 in the next decade, which bodes well for indie Semiconductor, Inc. (NASDAQ:INDI) in the long-term.
On July 20, Deutsche Bank analyst Ross Seymore maintained a Buy rating on indie Semiconductor, Inc. (NASDAQ:INDI) with a $10 price target.
Here is what Baron Funds has to say about indie Semiconductor, Inc. (NASDAQ:INDI) in its Q3 2021 investor letter:
“Indie Semiconductor, Inc. is a fabless designer, developer, and marketer of automotive semiconductors for automated driver assistance systems, user experience, and electrification applications. Indie leverages its cross-domain semiconductor expertise in analog, processing, and power chips to integrate multiple chips and capabilities into a single package and offer its customers lower cost products in a smaller form-factor. Indie has strong market share in applications such as Apple CarPlay and ultrasonic parking assist with multiple contracts ramping in the coming quarters in applications such as advanced lighting controls, telematics, and electrification. The stock rose on increasing investor recognition of the longer-term opportunity for the company, especially in light of the current automotive semiconductor supply shortage. Semiconductor content in cars is expected to grow substantially over the coming decade as automated safety features and electrification penetrate an increasing percentage of vehicles.”
4. Photronics, Inc. (NASDAQ:PLAB)
Market Cap as of September 22: $925.34 million
Photronics, Inc. (NASDAQ:PLAB) is one of the world’s largest semiconductor photomask suppliers. Around the end of August, Photronics, Inc. (NASDAQ:PLAB) posted impressive FQ3 results. The revenue surged 8% sequentially to $219.9 million. Net income was recorded at $31.2 million, representing an 82% YoY growth. Most of the revenue for the company is generated from the IC segment, which was up 11% sequentially and 37% on a YoY basis to $161.3 million. However, due to its weak Q4 guidance, the stock has taken a plunge and is trading at the lower end of its 52-week range of $12.18 – $25.81 at $15.00 as of September 23. At this price, the stock seems to provide an attractive buying opportunity.
On August 31, DA Davidson analyst Thomas Diffely reiterated a Buy rating on Photronics, Inc. (NASDAQ:PLAB) and lowered the price target to $28 from $30. The analyst noted that the company had a record high Q3 revenue and strong end market demand but weak Q4 guidance due to market uncertainty. He added that he believes the rough patch will be temporary.
Here is what Meridian Funds specifically said about Photronics, Inc. (NASDAQ:PLAB) in its Q2 2022 investor letter:
“Photronics, Inc. (NASDAQ:PLAB) is a semiconductor capital equipment company and a leader in photomasks, a critical component in the manufacturing of semiconductors and flat panel displays. The company’s earnings declined from a peak in 2015 due in part to a long-term trend within the semiconductor industry away from ASICs to FPGAs, which, to put it simply, allowed more semiconductor functionality to be made with fewer photomasks. Earnings also were pressured by significant investments made by Photronics to build out capacity in China, which took time to ramp up to profitability. We invested in the company in the second quarter of 2021 due to our thesis that 1) increased semiconductor content in a wide variety of products would revitalize the ASIC market; 2) its China investments would pay off, partially helped by an emerging trend toward localization of semiconductor production; and 3) Photronics is a well-managed industry leader with a strong balance sheet and improving return on capital. Despite macroeconomic worries about the semiconductor industry, the company’s stock advanced on news that it had exceeded earnings forecasts for the fourth consecutive quarter, with projections for 2022 earnings per share rising to $1.90 per share, up from less than $1 at the time of our investment. We added to our position in Photronics during the quarter when the strong results were initially not recognized. We believe current secular trends should remain intact for several years, however, we are conscious of the potential for near-term macro-driven volatility.”
3. Xperi Holding Corporation (NASDAQ:XPER)
Market Cap as of September 22: $1.52 billion
Xperi Holding Corporation (NASDAQ:XPER) is an American technology company that offers consumer and entertainment product licensing. The company provides its semiconductor packaging technology to some big names, such as Intel and Samsung.
Xperi Holding Corporation (NASDAQ:XPER) has shown significant growth and stability in the past few years. The company’s IP licensing business holds more than 11,000 patents and generates an average recurring revenue of $375 million. Between 2016 and 2020, Xperi Holding Corporation (NASDAQ:XPER) saw revenue and FCF growth of 4.2% and 2.95%, respectively. There was a slight dip in revenues and FCF in 2021 to $878 million from $892 million in the prior year due to R&D expenses. However, the company has since rebounded as it recorded a $925 million revenue LTM.
Xperi Holding Corporation (NASDAQ:XPER) is a small-cap dividend stock with a yield of 1.36% as of September 22. The latest quarterly dividend of $0.05 was paid out on September 19 to the shareholders of record as of August 29.
2. SiTime Corporation (NASDAQ:SITM)
Market Cap as of September 22: $1.711 billion
SiTime Corporation (NASDAQ:SITM) is a California-based semiconductor company that provides silicon timing systems to its customers.
SiTime Corporation (NASDAQ:SITM) has the perfect opportunity for the fast-growing 5G market through its Communications & Enterprise end market. The company can capture a significant part of the $48 billion 5G market. Furthermore, SiTime Corporation (NASDAQ:SITM) also caters to the automotive, industrial, and aerospace sectors. The global IoT automotive market alone is expected to grow at a CAGR of 25.5% to $286 billion in 2028, which proves to be a significant growth prospect for the company.
The most significant advantage that SiTime Corporation (NASDAQ:SITM) holds is its supply during these harsh economic conditions and supply constraints. The company has increased its inventory by $4 million from the previous quarter.
1. Axcelis Technologies, Inc. (NASDAQ:ACLS)
Market Cap as of September 22: $1.93 billion
Axcelis Technologies, Inc. (NASDAQ:ACLS) is an American semiconductor equipment and materials company. It produces ion implantation and other processing equipment, including curing systems used to fabricate semiconductor chips.
The most significant chunk of revenue for Axcelis Technologies, Inc. (NASDAQ:ACLS) comes from the ion implantation segment at 97%. The total addressable market for ion implantation has more than doubled to $2.25 billion in the last three years. In addition, the company has announced its new Axcelis Asia Operations Center to increase the production of ion implantation systems. The new 44,000 square feet facility is set to expand Axcelis Technologies, Inc. (NASDAQ:ACLS)’s market to South Korea and the rest of Asia.
On August 4, Stifel analyst Patrick Ho maintained a Buy rating on Axcelis Technologies, Inc. (NASDAQ:ACLS) and raised his price target to $93 from $89. The analyst mentioned that he became more “encouraged” on the company’s near-term prospects and position heading into 2023 after the company’s Q2 conference call.
You can also take a look at Best Cloud Stocks To Buy and 16 Best Penny Stocks to Buy Now.
