VLN - 3 Semiconductor Stocks to Buy Now: May 2024

2024-05-24 06:00:00 ET

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Although the technology sector seemingly appeared stretched, its continued impressive performance may warrant a reconsideration of semiconductor stocks to buy. Stated bluntly, concerns that the innovation space lost its touch may have been overblown.

Call it normalcy bias if you want. However, semiconductor stalwart Nvidia (NASDAQ: NVDA ) proved once again that you can’t cast doubt on its business. Ahead of its much anticipated and super-critical earnings report, the company showed a more than 400% increase in data center business . Needless to say, Nvidia blew past analysts’ expectations for the top and bottom lines.

More than likely, this outperformance will have downwind benefits for other tech players. With that in mind, below are semiconductor stocks to buy.

Taiwan Semiconductor (TSM)

With Nvidia’s impressive earnings performance, betting on Taiwan Semiconductor (NYSE: TSM ) seems like a foregone conclusion. Yes, it’s an obvious idea. However, with Nvidia consistently beating expectations, TSM should be on your radar for semiconductor stocks to buy. The two enterprises share a close relationship. So, if demand rises for NVDA, it should easily trickle down to TSM.

Financially, the contract manufacturing and design firm has been a consistent performer. Between the second quarter of last year to Q1 2024, the company’s average positive earnings surprise landed at 6.55%. Over the trailing 12 months ( TTM ), Taiwan Semiconductor posted net income of about $27.66 billion on sales of $71.4 billion.

For fiscal 2024, covering experts believe earnings per share will hit $6.29 on revenue of $85.16 billion. That’s a big step up from last year’s results of earnings of $5.19 per share on sales of $69.4 billion. In fiscal 2025, EPS could rise to $7.90 with a top line of $103.44 billion.

STMicroelectronics (STM)

Based in Switzerland, STMicroelectronics (NYSE: STM ) designs and develops various semiconductor products. In particular, it specializes in microcontrollers and radio frequency ( RF ) products. Further, the company enjoys a strong presence in the automotive market, specifically in the field of integrated circuits (ICs). While the company – abbreviated ST – isn’t necessarily a household name, there’s a good chance you’ve used products incorporate its chips.

Thanks to its wide utility, STM ranks as one of the semiconductor stocks to buy. However, the underlying company’s financial print has been somewhat shaky. In the past four quarters since Q1, the average earnings surprise came out to 4%. However, this tally included misses in Q2 2023 and Q1 2024. Still, over the TTM period, ST posted net income of $3.45 billion on revenue of $16.5 billion.

For fiscal 2024, covering experts see erosion, with EPS slipping to $2.15 on sales of $14.36 billion. Last year, the company posted EPS of $4.46 with a top line of $17.29 billion. However, a recovery trek may materialize in fiscal 2025, with EPS moving to $2.97 on revenue of $16.12 billion.

Valens Semiconductor (VLN)

Focusing on the audio-video and automotive industries, Valens Semiconductor (NYSE: VLN ) offers specialized utility. Per its public profile , Valens offers its HDBaseT technology, which enables the simultaneous delivery of ultra-high-definition digital video and audio, ethernet, USB, control signals and power through a single long-reach cable. It also offers automotive chipsets that undergird advanced driver-assistance systems and other automotive-data-related solutions.

Financially, Valens has been all over the map. For example. In its most recent Q1 2024 earnings report, the company posted a loss of six cents against an expected loss of two cents. On the other hand, in Q4 of last year, it delivered EPS of 6 cents when it was expected to incur a loss of one cent.

To be fair, analysts expect some trouble ahead. By the end of fiscal 2024, Valens could post a loss of 20 cents on sales of $54.89 million. That’s a big step back from a loss of 5 cents on revenue of $84.16 million. However, fiscal 2025 could see the beginnings of a recovery. Also, since August, analysts have rated shares a unanimous buy .

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .

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