Stocks to buy

3 Semiconductor Stocks Looking Like Steals in Q1

Semiconductor stocks are attracting attention this year as artificial intelligence (AI) adoption leads to a mushrooming growth in the demand for chips. The sector’s success will have significant implications on the U.S. economy due to the ubiquitous demand for microprocessors.

Furthermore, the sector is anticipated to grow in 2024 as supply chain problems are resolved following a pandemic that severely hindered the production of new chips. Legislation such as the CHIPS Act will also certainly help improve research and infrastructure for the chip industry, serving as an external tailwind. Research firm Gartner expects sales to rise by 17% this year to $624 billion.

The graphics processing units (GPU) giant Nvidia (NASDAQ:NVDA) is leading the sector in total return and grabbing most of the headlines. However, several other semiconductor stocks hold the potential to emulate Nvidia.

With the market predicted to reach $1 trillion by 2030, we’ve identified three semiconductor stocks with room for growth.

Broadcom (AVGO)

Source: Sasima / Shutterstock.com

A long-term player in the chip industry, Broadcom (NASDAQ:AVGO) is looking to leverage AI, particularly through cloud computing sales related to generative AI projects, to drive its results moving forward.

Broadcom’s financial health is solid. The latest earnings exceeded estimates, driven by robust growth in the AI segment. The chipmaker also raised its guidance for fiscal 2024 revenue for its AI segment. AVGO now expects AI to constitute 20% of its total or 35% of its chip sales in fiscal 2024.

The firm also reported strong performance in its VMware unit, which contributed to its diversification and software offerings.

Its free cash flow was up 19.3%, from $3.9 billion last year to $4.7 billion during the quarter. It is a key metric for Broadcom’s investors because its payout ratio is 46%. AVGO is on a 13-year streak of raising dividends, making it an attractive income play among semiconductor stocks.

Finally, AVGO stock trades at 27.7x forward price to earnings, which makes it cheaper than many semiconductor stocks. It holds a consensus strong buy rating with an average 12-month price target of $1,552, representing a roughly 20% increase from the last reported price of $1,292.

Camtek (CAMT)

Source: Pavel Kapysh via shutterstock

Camtek (NASDAQ:CAMT), known for its inspection and metrology equipment, has a solid balance sheet and financial track record. The stock is up 12% but its 12-month price target is $91, reflecting an upside of roughly 20% from the recent price of $75.

In the last quarter, Camtek unveiled earnings per share of 57 cents, 8.22% more than expected (53 cents). The Israeli company’s revenue of $88.69 million was just over the $88.02 million estimate.

Anticipating a 30% surge in its first-quarter 2024 revenues, Camtek has guided revenues between $93 million and $95 million. This prediction, separate from the recent acquisition of FRT metrology, lays the groundwork for a successful year.

For $100 million in cash, Camtek took control of FRT Metrology, a leading producer of high-precision metrology solutions for the advanced packaging and silicon carbide sectors. The purchase expanded Camtek’s portfolio to include more advanced metrology solutions. FRT is forecasting to earn more than $30 million in revenue 2024 from the segment.

Camtek enjoys a strong backlog with new orders for 46 systems from various tier-1 High-Bandwidth Memory manufacturers, with most deliveries planned for 2024. These systems are essential for high-performance computing in multiple fields, such as AI and data centers.

The combination of double-digit upside, backlog of orders, and solid financial performance makes it one of the best semiconductor stocks to buy right now.

Micron Technology (MU)

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Micron (NASDAQ:MU) is a prominent name among semiconductor stocks due to its strong position in the computer memory market.

Because of the rise of memory-intensive applications and systems, MU’s concentration on DRAM and NAND memory products attracts attention.

Micron’s growth tailwinds are reflected on the bottom line, with revenue and earnings outstripping analyst estimates in fiscal Q1’24. Additionally, at $1.40 billion as opposed to $249 million in the previous quarter, Micron’s operational cash flow was remarkably robust. MU expects sales of $5.30 billion, plus or minus $200 million, in the second quarter of fiscal 2024, with a gross margin of 12.0% to 13.0%.

The chipmaker expects a strong showing this year and forecasts a quick recovery in the chip market, particularly for memory and flash storage. Micron’s advancements in high-bandwidth memory chips, especially for use in Nvidia’s AI platforms, are the foundation for a strong year.

MU’s upside is limited to 3%, but this is expected when dealing with semiconductor stocks riding the Nvidia wave.

On the publication date, Faizan Farooque did not have (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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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