Stocks to buy

3 Semiconductor Stocks That Could Be Multibaggers in the Making

Semiconductor stocks still have a lot of gas left in the tank. The valuations of these companies are buoyed by an estimated chip shortage, as well as the Western world’s diversification from the main foundries located in Taiwan, such as Taiwan Semiconductor Manufacturing (NYSE:TSM).

The good news is semiconductor stocks to buy have lower valuations than TSM and smaller market caps. Although these companies might be riskier, they also give investors the prospect of a proportional upside.

So, let’s dive into multiplying your capital with three lesser-known semiconductor stocks.

Microchip Technology (MCHP)

Source: Michael Vi / Shutterstock.com

Microchip Technology (NASDAQ:MCHP) is brand that produces analog semiconductors and microcontrollers. MCHP’s product strategy is producing lower-priced chips representing good customer value.

Bulls might want to take a close look at MCHP. In the short term, it is benefiting from strong momentum amid the announcement of its new PIC18-Q24 microcontroller. This chip offers security benefits, including a Programming and Debugging Interface Disable (PDID) for added protection.

MCHP’s recent reveal of the PIC18-Q24 chip should be seen in context with its PIC18 Q20 MCU family of units, which analysts predict could unlock substantial shareholder value.

Then, sturdy fundamentals give it the potential for strong capital appreciation. Its market cap is relatively small in comparison to its larger peers at $44.90 billion. Also, it has extremely high institutional ownership at 94.60%, which should give retail investors confidence that smart money is on their side.

Shares of MCHP are relatively cheap, too, as its forward P/E ratio is 18.59 times earnings. This may entice investors into making an entry.

Monolithic Power Systems (MPWR)

Source: Shutterstock

Monolithic Power Systems (NASDAQ:MPWR) provides integrated power semiconductors. This company is a more contentious pick amid its share dilution and company executives selling shares. However, the worst could be over, and its upside remains intact.

Some good news for MPWR is that it recently exceeded its third-quarter EPS estimates despite a higher number of shares outstanding. Furthermore, its revenue for the period met analyst expectations. Management said it would grow its top line at around 12% for the next three years.

Despite its unusually high share price of $546.04, its market capitalization hovers around 27.47 billion. Its stock could still have a lot of potential to move higher. Indeed, according to their consensus estimates, Wall Street analysts are overwhelmingly bullish on MPWR stock, with a consensus rating of strong buy.

For next year, analysts expect its EPS to grow by 14.98%, which could lead to substantial capital appreciation.

Silicon Laboratories (SLAB)

Source: Shutterstock

Silicon Laboratories (NASDAQ:SLAB) is a slightly different pick from the other companies. It produces silicon chips, but has additional product lines that target customers in the Internet of Things (IoT) segment. Therefore, its earnings might be more diversified than relying solely on the cyclical semiconductor industry.

Also, SLAB differs from others because it’s more of a contrarian play for those who like to go against the grain. The company’s share is down 29.68% over the past year. This decline in SLAB’s stock price started in July but accelerated amid posting forward guidance that disappointed the market.

The weak guidance can largely be chalked up to the short-term lack of demand for its chips, which still account for most of its earnings and revenues. On a bright note, these headwinds are expected to inverse long-term. Its business execution remains strong, managing to beat EPS estimates despite a bearish backdrop.

Analysts remain bullish on SLAB, which has a potential upside of 47.31% over the next year. In fact, some say that its stock will rise by up to 85.76%. These predictions were based on SLAB’s historically strong performance in growing its EPS and revenues and is therefore, one of those semiconductor stocks to buy.

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

Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.

Articles You May Like

It’s Time! 3 Overplayed REITs to Sell in February
Steer Clear! 1 Big Reason to Avoid QuantumScape Stock.
Berkshire shares jump after big profit gain as Buffett’s conglomerate nears $1 trillion valuation
3 Top Penny Stocks for 5,000% Upside in 2024 and Beyond
3 Biotech Stocks That Could Be Multibaggers in the Making: February Edition