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Semiconductor stocks have been on an absolute tear in the past decade, due to the explosion of smartphones, tablets, and other connected devices. In the last 18 months, the artificial intelligence (AI) megatrend has driven several chip stocks toward all-time highs. In fact, since July 2014, the VanEck Semiconductor ETF (SMH) has returned a staggering 1,160% to shareholders in dividend-adjusted gains.
Given the demand for memory or computing chips is unlikely to abate, here are three “Strong Buy”-rated semiconductor picks for penny stock speculators.
#1. Ideal Power Stock
Ideal Power (IPWR), valued at $59 million by market cap, develops power converter solutions for photovoltaic generation, grid storage, and electrified vehicle (EV) charging. Its product portfolio includes solar inverters, EV chargers, and battery converters.
Ideal Power stock recently went public and raised $15.7 million via an IPO, receiving $13.7 million in net proceeds. The company is fairly pre-revenue, given it reported sales of $78,739 in Q1 of 2024 while operating expenses totaled $2.5 million. IPWR used $1.9 million to fund its operations, which suggests it has cash to support its operations for over two years, given it ended Q1 with $20 million in cash.
The single analyst covering Ideal Power stock has a “Strong Buy” recommendation and a 12-month target price of $14, 81.3% higher than Friday's close.
#2. Poet Technologies Stock
Valued at $186 million by market cap, Poet Technologies (POET) designs and develops high-speed optical modules, optical engines, and light source products for hyperscale data centers. Its photonic integration solutions allow for the integration of electronic and photonic devices into a single chip using advanced wafer-level semiconductor manufacturing techniques. These products cost less than competitors and consume less power while being smaller in size. The company also manufactures novel light source products for chip-to-chip data communication within and between AI servers.
In Q1 of 2024, Poet Technologies reported a net loss of $5.7 million, or $0.12 per share, compared to its year-ago loss of $5.3 million, or $0.14 per share. A pre-revenue company, Poet allocated $1.9 million towards research and development, compared to $2.3 million in the year-ago period. It emphasized that fluctuations in R&D expenses should be expected as it transitions from technology development to product development.
The single analyst covering Poet Technologies stock has a “Strong Buy” recommendation and a 12-month target price of $7.55, 143.5% higher than current prices.
#3. Valens Semiconductor Stock
The final chip stock on my list is Valens Semiconductor (VLN), which provides semiconductor products for the audio-video and automotive industries. The company offers HDBaseT technology, which enables the simultaneous delivery of digital video and audio, Ethernet, USB, control signals, and power through a single cable.
In Q1 of 2024, Valens reported revenue of $11.6 million, lower than its year-ago sales of $23.9 million. As a result of the softer sales, Valens reported an adjusted EBITDA loss of $7.1 million, wider than its year-ago loss of $2.9 million. With $140 million in cash and no debt, Valens has the liquidity to support its losses through 2026.
Each of the three analysts covering the stock has a “Strong Buy” rating, with the average target price of $3.67 representing upside potential of 33.5% to Friday's close.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
