While the Russia-Ukraine war has exacerbated global logistical challenges, the overwhelming demand for semiconductors from consumer electronics, electric cars, and other industries should hold investors' interest in the sector. Furthermore, according to Counterpoint Research, the global semiconductor chip shortage will likely ease during the second half of 2022 as the demand-supply gaps decrease across most components.
Also, President Biden last week urged Congress to reconcile its differences on the Bipartisan Innovation Act. The House and Senate have passed their own versions of the bills in a widely bipartisan fashion and now must come to a consensus in a conference committee. The bill will boost domestic semiconductor production and bolster competitiveness with China. The global semiconductor market is anticipated to reach $820.1 billion by 2028, growing at a CAGR of 5.3%.
Given this backdrop, we think it could be prudent to invest in quality small-cap semiconductor stocks Axcelis Technologies, Inc. (ACLS) and Xperi Holding Corporation (XPER), which have recently suffered price declines as part of the broader tech selloff.
Click here to checkout our Semiconductor Industry Report for 2022
Axcelis Technologies, Inc. (ACLS)
With a market capitalization of $1.92 billion, ACLS din Beverly, Mass., designs, manufactures, and services ion implantation and other processing equipment used to fabricate semiconductor chips in the United States, Europe, and Asia. The company provides high-energy, high-current, and medium-current implanters for several application requirements.
During the fourth quarter, ending Dec.31, 2021, ACLS' revenue increased 71.5% year-over-year to $198.53 million. Its income from operations grew 231% from its year-ago value to $46.58 million, while its net income improved 143.6% from its prior-year quarter to $35.75 million. The company's EPS rose 144.2% year-over-year to $1.05.
Analysts expect ACLS' revenue to increase 45.4% year-over-year to $193.12 million in the first quarter (ending March 31, 2022). The company's EPS is expected to grow 101% year-over-year to $0.97 in the first quarter, ending March 31, 2022. In addition, it has an impressive earnings history; it surpassed the consensus EPS estimate in each of the trailing four quarters.
The stock has declined 28.1% in price over the past month. In addition, closing yesterday's trading session at $57.93, the stock is currently trading 30.8% below its 52-week high of $83.74, which it hit on March 24, 2022.
ACLS' POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ACLS is also rated an A for Growth and a B for Quality and Value. Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #8 of 96 stocks.
To see additional POWR Ratings for Stability, Momentum, and Sentiment for ACLS, click here.
Xperi Holding Corporation (XPER)
XPER, together with its subsidiaries, functions as a consumer and entertainment product/solutions licensing company worldwide. It has two operational segments–Intellectual Property Licensing, which primarily licenses its innovations to companies in the entertainment industry under the Adeia brand; and Product, which includes Pay-TV that delivers user experience (UX) solutions. It has a market capitalization of $1.73 billion. XPER is based in San Jose, Calif.
This month, TiVo, a wholly-owned subsidiary of XPER, announced that its prominent streaming products, TiVo Stream 4K and TiVo Stream OS, have expanded its premium Live TV offerings through an integration with YouTube TV, which is the first integration of its kind among streaming products. Through this integration with YouTube TV, the premium live streaming service, TiVo can improve its consumer experience by offering TiVo Stream 4K users the capacity to stream more than 85 channels of live sports, entertainment, and news.
In February, XPER made a new multi-year agreement with Micron Technology Inc. ("Micron"), a leading innovative memory solution that changes how the world uses information. Micron now has access to Adeia's hybrid bonding IP to enhance next-generation memory devices. Jon Kirchner, the CEO of Xperi, said, "As the industry continues to shift toward advanced 3D technologies and architectures to scale performance and functionality, we remain well-positioned as a recognized leader in hybrid bonding."
For the fourth quarter, ending Dec. 31, 2021, XPER's revenue amounted to $214.45 million. Its non-GAAP net income was $33.88 million, while its non-GAAP EPS amounted to $0.30. Its cash and cash equivalent increased 18.2% from its year-ago value to $201.12 million for its fiscal year ending Dec. 31, 2021.
The $0.63 consensus EPS estimate for the first quarter, ending March 31, 2022, indicates a 7.3% improvement year-over-year. Analysts expect XPER's revenue to increase 13.9% year-over-year to $252.49 million in the first quarter, ending March 31, 2022. Furthermore, it has an impressive earnings history; it surpassed the consensus EPS estimate in three of the trailing four quarters.
The stock has declined 6.8% in price over the past month. Furthermore, closing yesterday's trading session at $16.53, the stock is currently trading 27.5% below its 52-week high of $22.81, which it hit on June 10, 2021.
XPER's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Quality. In the Semiconductor & Wireless Chip industry, it is ranked #31.
In total, we rate XPER on eight distinct levels. Beyond what we have stated above, we have also given XPER grades for Growth, Value, Momentum, Stability, and Sentiment. Get all the XPER ratings here.
Click here to checkout our Semiconductor Industry Report for 2022
ACLS shares were trading at $56.26 per share on Thursday afternoon, down $1.67 (-2.88%). Year-to-date, ACLS has declined -24.54%, versus a -6.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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