An industrial supply chain shortage was a major concern last year that is expected to persist this year. Furthermore, the emergence of the COVID-19 omicron variant in China is exacerbating global concerns because its manufacturers and shippers face disruptions. So, with the continuing impediments in the supply chain, the semiconductor chip shortage is also likely to drag on throughout the year, further raising the price of chips.
To combat this, chipmakers are investing heavily to build new manufacturing facilities and ramp up production. According to a Deloitte report, the global semiconductor chip industry is expected to reach $600 billion in 2022.
Therefore, we think it could be wise to bet on quality semiconductor stocks Taiwan Semiconductor Manufacturing Company Limited (TSM), Intel Corporation (INTC), and Kulicke and Soffa Industries, Inc. (KLIC).
Click here to checkout our Semiconductor Industry Report for 2022
Taiwan Semiconductor Manufacturing Company Limited (TSM)
Headquartered in HsinChu, Taiwan, TSM manufactures and sells integrated circuits and semiconductors. The company's products are used in personal computers (PCs), wired and wireless communication systems, industrial equipment, and consumer electronics. TSM serves markets in North America, Europe, Japan, China, and South Korea.
TSM's net revenue increased 21.2% year-over-year to NTD438.19 billion ($15.85 billion) in its fourth fiscal quarter, ended Sept. 30, 2021. The company's gross profit increased 18.2% from the year-ago value to NTD230.76 billion ($8.35 billion). Its income from operations rose 16.3% from its year-ago value to NTD182.77 billion ($6.61 billion). Also, the company's net income increased 16.5% year-over-year to NTD166.37 billion ($6.02 billion).
Analysts expect TSM's revenue for its fiscal year 2022 to be $72.73 billion, representing 27.6% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Also, its EPS is expected to grow 21.5% in fiscal 2021 and 31.6% in fiscal 2022. Its stock price has increased 11.7% over the past month.
TSM's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Quality and Sentiment. We have also graded TSM for Momentum, Stability, Growth, and Value. Click here to access all TSM's ratings. TSM is ranked #40 of 100 stocks in the A-rated Semiconductor & Wireless Chip industry.
Intel Corporation (INTC)
INTC in Santa Clara, Calif., is a global manufacturer and designer of technologies for the cloud, smart, and connected devices for retail, industrial, and consumer uses. The company operates through DCG; IOTG; Mobileye; NSG; PSG; CCG, and All Other segments. Accelerators, connectivity, memory and storage, platform products, and boards and systems are INTC's products.
This month, INTC announced its plan for an initial investment of more than $20 billion to construct two new leading-edge chip factories in Ohio. The company believes that the investment will boost production to meet the increasing demand for semiconductors and power a new generation of innovative products.
During its third quarter, ended Sept. 25, 2021, INTC's net revenue increased 4.6% year-over-year to $18.1 billion. The company's gross margin grew 10.3% from its year-ago value to $10.75 billion. Its operating income rose 3.3% from the prior-year quarter to $5.23 billion. Also, the company's net income increased 55.6% year-over-year to $7 billion.
INTC has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also, its EPS is expected to increase at a 3.2% rate per annum over the next five years. INTC has gained 4.9% in price over the past month.
INTC's POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has an A grade for Value and a B grade for Quality.
In addition to the POWR Rating grades I've just highlighted, one can see INTC's ratings for Growth, Stability, Momentum, and Sentiment here. The stock is ranked #10 in the Semiconductor & Wireless Chip industry.
Kulicke and Soffa Industries, Inc. (KLIC)
Headquartered in Singapore, KLIC is a semiconductor and electronic assembly solutions provider that serves the global automotive, consumer, communications, computing, and industrial markets. It operates through Capital Equipment; and Aftermarket Products and Services (APS) segments. KLIC manufactures and sells advanced displays, flip-chip, TCB advanced packaging products, and other system software products.
This month, KLIC launched KNeXt, the new web-based industry 4.0 software solution. This solution connects the company's equipment and enables fleet management, factory automation, and productivity improvement. KNeXt is designed to serve various market segments by providing the most comprehensive solutions, with the flexibility to customize based on customer and application-specific process flows.
KLIC's net revenue increased 173.1% year-over-year to $485.33 million for its fiscal fourth quarter, ended Oct. 2, 2021. The company's gross profit grew 160.2% from its year-ago value to $231.32 million. Its income from operations rose 5.72% from the prior-year quarter to $154.84 million. And the company's net income increased 747.1% year-over-year to $133.71 million.
For its fiscal year 2022, analysts expect KLIC's revenue to increase 3.9% year-over-year to $1.58 billion. It has surpassed the consensus EPS estimates in each of the trailing four quarters. The company's EPS is estimated to grow 20% per annum over the next five years. The stock has gained 38.3% in price over the past year.
It is no surprise that KLIC has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Value and a B for Momentum and Quality.
Click here to see the additional POWR Ratings for KLIC (Growth, Stability, and Sentiment). In the Semiconductor & Wireless Chip industry, KLIC is ranked #29.
Note that KLIC is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Click here to checkout our Semiconductor Industry Report for 2022
TSM shares were trading at $124.88 per share on Friday afternoon, down $3.45 (-2.69%). Year-to-date, TSM has gained 3.80%, versus a -7.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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