The semiconductor industry’s long-term growth prospects remain optimistic because of the increasing use of chips in powering technological advancements. So, I think semiconductor stocks NXP Semiconductors N.V. (NXPI), Qorvo, Inc. (QRVO) and QUALCOMM Incorporated (QCOM) could be worth adding to your portfolio for solid returns.
The Semiconductor Industry Association (SIA) reported that global semiconductor sales grew 1.9% in September 2023 compared to August 2023. Worldwide semiconductor sales totalled $134.70 billion in the third quarter of 2023, a 6.3% rise over the second quarter of 2023.
Moreover, the global artificial intelligence chip market is expected to increase at a CAGR of 38.2%, reaching $383.7 billion by 2032. This expansion might be due to the increasing demand for AI-enabled products and applications in a variety of industries. Also, advances in deep learning algorithms and the growing use of AI in autonomous vehicles are supporting market growth.
The global semiconductor market is expected to grow at a 9.2% CAGR until 2030. Investors’ interest in chip stocks is evident from the VanEck Vectors Semiconductor ETF’s (SMH) 21.1% returns over the past six months.
With these favorable trends in mind, let’s delve into the fundamentals of the three best Semiconductor & Wireless Chip stocks, beginning with number 3.
Stock #3: NXP Semiconductors N.V. (NXPI)
Headquartered in Eindhoven, the Netherlands, NXPI provides various semiconductor products. The company’s diverse product portfolio includes microcontrollers, application processors, wireless connectivity solutions, analog devices, RF power amplifiers, security controllers, and environmental sensors.
NXPI’s forward non-GAAP P/E of 13.17x is 39% lower than the industry average of 21.60x. Its forward EV/EBIT of 11.90x is 33.8% lower than the industry average of 17.99x.
NXPI’s trailing-12-month ROCE of 36.19% is significantly higher than the 1.10% industry average. Its trailing-12-month ROTA of 11.76% is significantly higher than the 0.09% industry average.
For its fiscal third quarter that ended October 1, 2023, NXPI’s total revenue came in at $3.43 billion. Its non-GAAP gross profit increased 4.4% sequentially to $2.01 billion. Its non-GAAP net income stood at $965 million, up 7.7% sequentially, while non-GAAP EPS rose 7.9% from the previous quarter to $3.70.
Analysts expect NXPI’s revenue to increase 3.6% year-over-year to $13.72 billion for the year ending December 2024. Its EPS is expected to grow 5.2% year-over-year to $14.65 for the same year. It surpassed EPS estimates in three of four trailing quarters. Shares of NXPI has gained 12.4% over the past year to close the last trading session at $183.35.
NXPI’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 assess stocks by 118 different factors, each with its own weighting.
NXPI also has a B grade for Momentum and Quality. It is ranked #14 out of 91 stocks in the Semiconductor & Wireless Chip industry. Click here for the additional POWR Ratings for Value, Stability, Sentiment and Growth for NXPI.
Stock #2: Qorvo, Inc. (QRVO)
QRVO engages in development and commercialization of technologies and products for wireless, wired, and power markets. It operates through three segments: High Performance Analog (HPA); Connectivity and Sensors Group (CSG); and Advanced Cellular Group (ACG).
QRVO’s forward non-GAAP PEG of 0.51x is 71.2% lower than the industry average of 1.77x. Its forward EV/EBITDA of 11.73x is 12.7% lower than the industry average of 13.44x.
QRVO’s trailing-12-month CAPEX / Sales of 4.36% is 79.5% higher than the 2.43% industry average. Its trailing-12-month EBITDA margin of 11.59% is 26.6% higher than the 9.15% industry average.
QRVO’s total current assets came in at $2.26 billion for the period that ended September 30, 2023, compared to $2.03 billion for the period that ended April 1, 2023. Its total assets came in at $6.72 billion, compared to $6.69 billion for the same period.
The consensus revenue came in at $3.66 billion for the fiscal year ending March 2024 represents a 2.7% increase year-over-year. Its EPS is expected to come in at $5.59 for the same year. It surpassed EPS estimates in all the four trailing quarters. QRVO’s shares has lost marginally intraday to close the last trading session at $87.94.
It’s no surprise that QRVO has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Growth, Sentiment and Momentum. It is ranked #12 in the same industry.
Beyond what is stated above, we’ve also rated QRVO for Value, Stability and Quality. Get all QRVO ratings here.
Stock #1: QUALCOMM Incorporated (QCOM)
QCOM engages in the development and commercialization of 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 EV/EBIT of 11.35x is 36.9% lower than the industry average of 17.99x. Its trailing-12-month EV/EBITDA of 10.14x is 24.6% lower than the industry average of 13.44x.
QCOM’s trailing-12-month ROTC of 15.05% is 485.7% higher than the 2.57 % industry average. Its trailing-12-month ROCE of 37.07% is significantly higher than the 1.10% industry average.
QCOM’s total revenues came in at $8.63 billion in the fiscal fourth quarter that ended September 24, 2023, while its non-GAAP net income stood at $2.28 billion. Its non-GAAP EPS amounted to $2.02.
QCOM’s total current liabilities came in at $9.63 billion for the period that ended September 24, 2023, compared to $11.87 billion for the period that ended September 25, 2022. Its total current assets came in at $22.46 billion, compared to $20.72 billion for the same period.
Street expects QCOM’s revenue to increase 5.8% year-over-year to $37.92 billion for the year ending September 2024. Its EPS is expected to grow 9.3% year-over-year to $9.21 for the same period. The shares has gained 10.9% over the past six months to close the last trading session at $120.06.
QCOM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #7 in the same industry. It has a B grade for Value, Momentum, Sentiment and Quality. To see additional QCOM’s ratings for Growth and Stability, click here.
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QCOM shares were trading at $121.91 per share on Thursday morning, up $1.85 (+1.54%). Year-to-date, QCOM has gained 13.14%, versus a 15.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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