Due to increasing chip demand in sectors like automotive, consumer electronics, telecom, and healthcare, the semiconductor industry is thriving despite economic challenges. Therefore, quality chip stocks Cohu, Inc. (COHU), QUALCOMM Incorporated (QCOM), and Applied Materials, Inc. (AMAT) could be hot picks this week. These companies also pay stable dividends.
The proliferation of consumer electronics, automotive, IoT devices, and AI technologies fuels the demand for semiconductor chips to power these devices and systems.
Moreover, continuous progress in technology, such as nanotechnology, new materials, and manufacturing processes, is boosting the development of more powerful and energy-efficient chips to meet evolving industry demands.
According to a report by Custom Market Insights, the global semiconductor chip market is expected to grow at a CAGR of 7.1% to reach $1.12 trillion by 2032.
In addition, the shift toward electric vehicles relies on advanced chips for battery management and control, while renewable energy systems require efficient power electronics. As a result, demand for semiconductors is on the rise.
Additionally, President Joe Biden signed the CHIPS and Science Act into law one year ago, and semiconductor companies across the U.S. have promised to spend $231 billion on building chip manufacturing hubs on American soil.
Furthermore, the healthcare sector's ongoing digital revolution, coupled with the widespread adoption of medical devices, creates a promising landscape for specialized semiconductor chips designed for healthcare applications.
Given these favorable trends, let's examine the core aspects of the top three Semiconductor & Wireless Chip stocks, beginning with the third-ranked option.
Stock #3: Cohu, Inc. (COHU)
COHU provides semiconductor test equipment and services in China, the United States, Taiwan, Malaysia, the Philippines, and internationally.
COHU’s 13.10% trailing-12-month EBIT margin is 192.5% higher than the 4.48% industry average. Its 19.44% trailing-12-month EBITDA margin is 115.1% higher than the 9.04% industry average.
COHU pays an annual dividend of $1.28, which translates to a dividend yield of 0.83% on the current market price. Its four-year average dividend yield is 1.03%. The company has raised its dividend payment at a CAGR of 10.5%.
COHU’s net sales for the second quarter ended July 1, 2023, came in at $168.92 million. The company’s non-GAAP net income and EPS came in at $22.84 million and $0.48, respectively. Its adjusted EBITDA stood at $33.31 million.
COHU’s EPS and revenue are expected to amount to $0.32 and $150.10 million in the fiscal third quarter ending September 2023.
Over the past year, the stock has gained 43.2% to close the last trading session at $37.72.
COHU’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
It has an A grade for Momentum and a B for Value and Sentiment. It is ranked #20 out of 92 stocks in the Semiconductor & Wireless Chip industry.
Beyond what we have stated above, one can see COHU’s ratings for Growth, Stability, and Quality here.
Stock #2: QUALCOMM Incorporated (QCOM)
QCOM engages in developing and commercializing foundational technologies for the wireless industry worldwide. It operates through three segments: Qualcomm CDMA Technologies; Qualcomm Technology Licensing; and Qualcomm Strategic Initiatives.
QCOM’s trailing-12-month EBIT and EBITDA margins of 29.51% and 34.28% are 558.9% and 279.3% higher than the 4.48% and 9.04% industry average.
On July 14, QCOM declared a quarterly cash dividend of $0.80 per common share, payable on September 21, 2023.
The company pays an annual dividend of $3.20, which translates to a dividend yield of 2.77% on the current market price. Its four-year average dividend yield is 2.32%. The company has raised its dividends at a CAGR of 6.9% over the past three years.
QCOM’s total revenues came in at $8.45 billion in the fiscal third quarter that ended June 25, 2023, and its net income stood at $1.80 billion. Its EPS amounted to $1.60. Also, its operating income came in at $1.82 billion.
QCOM’s revenue and EPS are expected to stand at $8.51 billion and $1.90 in the fiscal fourth quarter ending September 2023.
The stock has gained 5% year-to-date to close the last trading session at $115.39.
QCOM’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
QCOM has an A grade for Quality, Value, and Momentum. Within the same industry, it is ranked #19.
Click here for the additional QCOM POWR Ratings for Growth, Stability, and Sentiment.
Stock #1: Applied Materials, Inc. (AMAT)
AMAT provides manufacturing equipment, services, and software to the semiconductor, display, and related sectors in the United States, China, Korea, Taiwan, Japan, and Europe. The company operates through three segments: Semiconductor Systems; Applied Global Services; and Display and Adjacent Markets.
AMAT’s trailing-12-month EBIT and EBITDA margins of 29.07% and 30.98% are 548.9% and 242.8% higher than the 4.48% and 9.04% industry average.
On July 11, AMAT unveiled the Vistara wafer manufacturing platform, a groundbreaking innovation in chip production. This platform addresses industry challenges by offering enhanced flexibility, intelligence, and sustainability for chip manufacturers.
AMAT pays an annual dividend of $1.28, which translates to a dividend yield of 0.83% on the current market price. Its four-year average dividend yield is 1.03%. The company has raised its dividend payment at a CAGR of 10.5%.
During the third quarter that ended July 30, 2023, AMAT’s net sales amounted to $6.43 billion. Its net sales from the Applied Global Services segment rose 3.1% year-over-year to $1.46 billion. As of July 30, 2023, the company’s cash and cash equivalents were $6.03 billion, compared to $2 billion as of October 30, 2022.
Street expects AMAT’s EPS for the fiscal year (ending October 2023) to increase 2.5% year-over-year to $7.89. Its revenue is expected to rise 2.1% year-over-year to $26.32 billion in the same year. In addition, the company exceeded the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has soared 67.7% over the past year to close the last trading session at $153.99.
It is no surprise that the stock has an overall rating of B, equating to Buy in our proprietary rating system.
AMAT has an A grade for Momentum and a B for Quality. In the same industry, it is ranked #16.
To see the other ratings of AMAT for Sentiment, Growth, Value, and Stability, click here.
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AMAT shares were trading at $153.25 per share on Tuesday morning, down $0.74 (-0.48%). Year-to-date, AMAT has gained 58.49%, versus a 18.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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