The increasing need for efficient tech products and solutions from several industries has fueled the growth of semiconductor sales. The global semiconductor industry generated $43.60 billion in sales in May 2021, up 26.2% year-over-year. Semiconductor sales, as reported by The Semiconductor Industry Association, on a three-month moving basis as of May were higher than any previous month in the market’s history, indicating improving semiconductor production.
Favorable government policies and private investments to address a global semiconductor shortage have helped the industry achieve this significant improvement in sales. The worldwide semiconductor market is expected to grow 19.7% in 2021 to hit $527 billion. As such, we believe fundamentally sound semiconductor stocks Applied Materials, Inc. (AMAT – Get Rating) and Himax Technologies Inc. (HIMX – Get Rating) will be able to cash in on the improving supply conditions.
However, supplies have not yet caught up with the current demand levels. And because the global supply is expected to remain under pressure in the near term, we think fundamentally weak companies Marvell Technology Group Ltd. (MRVL – Get Rating) and Cree, Inc. (CREE – Get Rating) might struggle to stay afloat.
Click here to checkout our Semiconductor Industry Report for 2021
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AMAT provides material engineering solutions for making semiconductor chips to electronic manufacturers, flat panel displays and solar photovoltaic cells and modules. The company also supplies equipment to produce coatings for flexible electronics, packaging and other applications. AMAT is based in Santa Clara, Calif.
On June 16, AMAT unveiled a new materials engineering solution called the Endura Copper Barrier Seed IMS. It integrates seven process technologies in one system under high vacuum, enabling logic scaling to the 3nm node and beyond. As interconnect wiring consumes one third of a chip’s power, this breakthrough ensures that resistance is cut by 50%, and its improved chip performance, lower power consumption and longer battery life should help AMAT generate great demand in the coming months.
On May 5, AMAT introduced Draco, a new hard disk material co-optimized to work with AMAT’s Sym3 Y etcher that gives its memory customers three new ways to further scale DRAM and accelerate improvements in chip performance, power, area, cost and time to market (PPACt). Because the rapid digital transformation is creating demand for efficient storage solutions, such breakthroughs in DRAM, enabling it to operate at higher speeds and with less power, should enable AMAT to expand its market reach.
AMAT’s net sales for its fiscal second quarter, ended May 2, 2021, increased 41.1% year-over-year to $5.58 billion. The company’s non-GAAP gross profit has been reported at $2.67 billion, up 50.8% from the prior-year period. Its non-GAAP operating income came in at $1.77 billion, which represents an 81.1% rise year-over-year. While its net income increased 84.7% year-over-year to $1.51 billion, its non-GAAP EPS increased 83.1% year-over-year to $1.63. The company had $6.31 billion in cash and cash equivalents as of May 2, 2021.
A $1.78 consensus EPS estimate for the current quarter, ending July 31, 2021, represents a 67.7% improvement year-over-year. AMAT surpassed the Street’s EPS estimates in each of the trailing four quarters. The $5.92 billion consensus revenue estimate for the current quarter represents a 34.7% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 24.9% rate per annum over the next five years. The stock has gained 111.5% over the past nine months and closed yesterday’s trading session at $136.80.
AMAT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Quality and Momentum. Click here to see the additional ratings for AMAT (Growth, Value, Stability, and Sentiment).
AMAT is ranked #35 of 99 stocks in the B-rated Semiconductor & Wireless Chip industry.
Headquartered in Taiwan, HIMX is a semiconductor solution provider that manufactures display driver integrated circuits, digital camera solutions and timing controllers used in TVs, laptops, monitors, mobile phones, tablets, digital cameras, car navigation, virtual reality (VR) devices and many other consumer electronics devices.
On May 19, 2021, HIMX unveiled its latest phase modulation liquid crystal on silicon (LCoS) technology that will be used for AR Head-Up Display (AR HUD) and Wavelength Selective Switch (WSS) applications in automotive and communication industries. With AR HUD, using holographic display offers an intuitive multi-focal plane viewing experience and WSS triggers flexible high-bandwidth data manipulation, HIMX is expected to generate good sales in the near-term.
HIMX and CM Visual Technology Corp. (CMVT), a Taiwan-based company that designs and manufactures microstructure optical film, jointly announced their microstructure optical film, Omniwide Film, for resolving optical display performance challenges in certain types of display panel applications. Joining HIMX since October 2020 has…
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