Rising inflation and a slowing global economy have contributed to declining demand for some tech products, leading to falling demand for semiconductors. However, the extensive usage of chips in electronics, critical infrastructure, electric vehicles, and other industries and rising disposable income should drive the industry's growth in the long run.
Furthermore, increasing government and corporate spending to ramp up production should boost the industry’s growth in the upcoming months. The global semiconductor market is expected to reach $712.4 billion in 2028, growing at a CAGR of 8.8%.
Given the industry’s solid long-term prospects, it could be wise to invest in quality semiconductor stocks Taiwan Semiconductor Manufacturing Company Limited (TSM), QUALCOMM Incorporated (QCOM), and STMicroelectronics N.V. (STM), which are currently available at low prices.
Taiwan Semiconductor Manufacturing Company Limited (TSM)
Headquartered in Hsinchu City, Taiwan, TSM provides integrated circuit manufacturing services internationally. This involves manufacturing, packaging, testing, and selling integrated circuits and other semiconductor devices.
On October 27, 2022, TSM announced the Open Innovation Platform (OIP) 3DFabric Alliance at the 2022 Open Innovation Platform Ecosystem Forum. TSM’s first-of-its-kind alliance in the semiconductor industry will help customers achieve speedy silicon and system-level innovations and enable next-generation HPC and mobile applications using TSM’s 3DFabric technologies.
During the third quarter of the fiscal year 2022 ended September 30, 2022, TSM’s net sales increased 47.9% year-over-year to NT$613.14 billion ($19 billion), while its income from operations increased 81.5% year-over-year to NT$310.32 billion ($9.62 billion).
During the same period, TSM’s net income increased 79.7% to NT$280.87 billion ($8.70 billion) or NT$10.83 per share, up 79.8% year-over-year.
Analysts expect TSM’s revenue for the fiscal year 2022 to increase 22.8% year-over-year to $70.50 billion, while its EPS is expected to increase 55.8% year-over-year to $6.42. It has surpassed the consensus EPS estimates in each of the trailing four quarters. The stock dipped marginally intraday to close the last trading session at $61.55.
TSM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, representing Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TSM has an A grade in Quality and grade B for Growth and Sentiment. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #4 of 93 stocks.
Click here for the additional POWR Ratings for Momentum, Stability, and Value for TSM.
QUALCOMM Incorporated (QCOM)
QCOM is engaged in developing and commercializing foundational technologies for the global wireless industry. The company operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
On October 25, QCOM and Vodafone announced their partnership to develop and test next-generation 5G Open RAN Infrastructure. The solutions are expected to offer breakthrough power consumption performance to reduce total cost of ownership (TCO), make networks environmentally sustainable, and address the demands of next-generation networks needed for high-capacity dense urban scenarios.
On October 15, QCOM announced its partnership with Razer and Verizon Communications Inc. (VZ) to introduce Razer Edge 5G, the world’s first device powered by the new cutting-edge Snapdragon G3x Gen 1 Gaming Platform.
Micah Knapp, QCOM’s senior director of product management, expressed that the company is “proud to break new ground for the next generation of innovated gaming.”
On October 14, QCOM announced a quarterly cash dividend of $0.75 per common share, payable on December 15, 2022, to stockholders of record at the close of business on December 1, 2022. The company pays $3 annually as a dividend, which translates to a yield of 2.55% at the current price. QCOM has increased its dividends for the past 18 years.
In the fiscal 2022 third quarter ended June 26, 2022, QCOM’s net revenues increased 36.7% year-over-year to $10.93 billion. The company’s non-GAAP EBIT came in at $3.89 billion, up 53% from the prior-year period. Its non-GAAP net income improved 52.5% year-over-year to $3.36 billion. The company’s non-GAAP EPS increased 54.2% from its year-ago value to $2.96.
Analysts expect QCOM’s revenue and EPS for the fiscal year 2022 (ending September 2022) to increase 31.7% and 46.5% year-over-year to $44.09 billion and $12.51. The company has impressively surpassed the consensus EPS estimates in each of the trailing four quarters.
QCOM has gained 2.2% over the past month to close the last trading session at $117.66.
QCOM has an overall POWR Rating of B, which translates to a Buy in our proprietary rating system. It also has a grade of B for Quality and Value.
In the B-rated Semiconductor & Wireless Chip industry, QCOM is ranked #20 of 93 stocks.
In addition to the above, we have also given QCOM grades for Growth, Momentum, Stability, and Sentiment. Get all QCOM ratings here.
STMicroelectronics N.V. (STM)
STM is a semiconductor company headquartered in Geneva, Switzerland. The company develops, manufactures, and markets a range of semiconductor products. It has three segments: Automotive and Discrete Group (ADG); Analog, MEMS, and Sensors Group (AMS); and Microcontrollers and Digital ICs Group (MDG).
On October 31, STM updated the details of the share repurchase program approved by a shareholder resolution dated May 27, 2021, and by the supervisory board. The ordinary shares of 197,935 (equal to 0.02% of its issued share capital) at the weighted average purchase price per share of EUR 33.28 ($32.99) were acquired between October 24 and October 28, 2022.
This program demonstrates the company's confidence in its prospects, and it is expected to increase the intrinsic value of the holdings of existing shareholders.
For the fiscal 2022 third quarter ended October 1, 2022, STM’s net revenues increased 35.2% year-over-year to $4.32 billion, while its operating income increased 110.2% to $1.27 billion. During the same period, the company’s net income increased 131.3% year-over-year to $1.10 billion or $1.16 per share, up 127.5% year-over-year.
STM’s revenue and EPS for the fiscal year 2022 are expected to increase 25.1% and 84.2% year-over-year to $15.97 billion and $3.99, respectively. Additionally, it has an impressive feat of surpassing EPS estimates in each of the trailing four quarters.
The stock has dipped marginally over the past month to close the last trading session at $31.12.
It is no surprise that STM has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has a grade B for Growth, Value, Sentiment, and Quality.
STM ranked #2 in the same industry. Click here to access the additional POWR Ratings for Momentum and Stability for STM.
TSM shares were trading at $62.09 per share on Tuesday afternoon, up $0.54 (+0.88%). Year-to-date, TSM has declined -47.75%, versus a -18.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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