Surging semiconductor demand is propelled by consumer electronics and growing applications, emphasizing the need for advanced memory chips. Therefore, investors could consider adding top semiconductor stocks ROHM Co., Ltd. (ROHCY), Trio-Tech International (TRT), Nikon Corporation (NINOY), and Photronics, Inc. (PLAB) to their portfolios this year.
The global semiconductor industry is primarily driven by rapid technological innovation. The automotive industry's reliance on electronic components, the proliferation of IoT devices, and the integration of Artificial Intelligence (AI) and Machine Learning (ML) also play significant roles.
The global semiconductor market is projected to grow at a CAGR of 12.2% to reach $1.38 trillion by 2029.
Besides, the Semiconductor Industry Association (SIA) hails the CHIPS Act as a milestone, highlighting its role in bolstering U.S. semiconductor production and innovation. Moreover, over $200 billion in private investments and 40,000 jobs in the semiconductor ecosystem signal significant progress in the chips sector this year.
In addition, increasing demand for miniature devices and advanced electronics, coupled with 5G and IoT advancements, fuels growth in the global semiconductor manufacturing equipment market. Automation adoption in industries further boosts demand for specialized semiconductors, contributing to market expansion.
In 2023, the global semiconductor manufacturing equipment market was estimated at $103.10 billion and is expected to expand at a CAGR of 7.9% from 2024 to 2030.
Furthermore, International Data Corporation (IDC) anticipates a rebound in the global semiconductor market driven by normalized PC and smartphone inventory levels, electrification of manufacturing, and the introduction of AI-enabled devices. IDC predicts a 20.2% year-over-year growth in 2024, fueled by U.S. demand and increasing AI server and endpoint device needs.
Considering these conducive trends, let’s examine the fundamentals of four Semiconductor & Wireless Chip stock picks, beginning with the fourth choice.
Stock #4: ROHM Co., Ltd. (ROHCY)
Based in Kyoto, Japan, ROHCY designs and manufactures integrated circuits and electronic components, offering analog ICs, diodes, transistors, and power modules for diverse applications in the electronics industry. The company operates through segments like LSI Integrated Circuits; Discrete Semiconductor Devices; and Modules.
On December 8, 2023, ROHCY and Toshiba Electronic Devices & Storage Corporation partnered to manufacture power devices, receiving support from the Ministry of Economy, Trade and Industry.
The collaboration aims to enhance supply capabilities in silicon carbide (SiC) and silicon (Si) power devices, contributing to a stable semiconductor supply chain in Japan and supporting the government's goals.
ROHCY’s trailing-12-month EBIT margin of 14.72% is 199.1% higher than the industry average of 4.92%. Its 27.60% trailing-12-month EBITDA margin is 193.2% higher than the 9.42% industry average.
In the six months that ended September 30, 2023, ROHCY’s net sales and gross profit stood at YEN239.32 billion ($1.70 billion) and YEN80.16 billion ($568.24 million), respectively. The company's net cash provided by operating activities amounted to YEN42.90 billion ($304.10 million).
As of September 30, 2023, ROHCY's total assets amounted to YEN1.45 trillion ($10.28 billion), compared to its total assets of YEN1.12 trillion ($7.96 billion) as of March 31, 2023.
Street expects ROHCY’s revenue to grow 12.3% year-over-year to $3.94 billion for the fiscal year ending March 2025.
ROHCY’s shares have gained 1.5% over the past year to close the last trading session at $18.47.
ROHCY’s POWR Ratings reflect its positive prospects. 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, with each factor weighted to an optimal degree.
ROHCY has a B grade for Value, Momentum, and Stability. Within the Semiconductor & Wireless Chip industry, it is ranked #21 among 91 stocks.
In addition to the POWR Ratings stated above, one can access ROHCY’s additional Growth, Sentiment, and Quality ratings here.
Stock #3: Trio-Tech International (TRT)
TRT offers semiconductor manufacturing, testing, and distribution services globally. The company specializes in developing test equipment and provides testing services for semiconductor manufacturers.
TRT’s trailing-12-month EBITDA margin of 16.62% is 76.5% higher than the industry average of 4.42%. Its 8.28% trailing-12-month CAPEX / Sales is 250.2% higher than the 2.37% industry average.
In the first quarter ended September 30, TRT generated revenue and net income of $9.97 million and $207 thousand. The company's EPS stood at $0.05. Its operating expenses declined 1.3% year-over-year to $2.52 million.
TRT’s shares increased 10.5% over the past nine months to close the last trading session at $5.07.
TRT’s POWR Ratings reflect this sound outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Value and Momentum and a B for Sentiment. Within the same industry, it is ranked #16.
Click here for TRT’s additional Growth, Stability, and Quality ratings.
Stock #2: Nikon Corporation (NINOY)
Headquartered in Minato, Japan, NINOY is recognized for manufacturing optical instruments, including digital cameras and precision equipment. Their diverse product range spans imaging, healthcare, components, and industrial equipment.
On December 6, 2023, NINOY announced the upcoming launch of the NSR-S636E ArF immersion scanner, which is scheduled for this month. The system boasts superior overlay accuracy and ultra-high throughput for advanced semiconductor manufacturing, including 3D devices.
It incorporates an enhanced iAS for precise wafer measurement, promising a 10-15% increase in overall output compared to previous models.
NINOY’s trailing-12-month gross profit margin of 44.57% is 26.7% higher than the industry average of 35.47%. Its 11.90% trailing-12-month EBITDA margin is 9.1% higher than the 10.91% industry average.
During the six months ended September 30, 2023, NINOY's revenue and gross profit increased 14.9% and 7.5% from the prior-year quarter to YEN331.30 billion ($2.35 billion) and YEN142.07 billion ($1.01 billion), respectively. The company reported an EPS of YEN28.15.
As of September 30, 2023, NINOY's assets amounted to YEN1.10 trillion ($7.78 billion), compared to its YEN1.05 trillion ($7.44 billion) as of March 31, 2023.
For the fiscal year ending March 31, 2024, the company anticipates revenue to grow 9.9% to YEN690 billion ($4.89 billion). Additionally, the operating profit is expected to be YEN34 billion ($24.01 million).
Analysts expect NINOY’s revenue to grow 52.6% year-over-year to $4.67 billion for the fiscal year ending March 2024.
The stock has gained 10.8% over the past year to close the last trading session at $9.82.
NINOY’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A for Momentum and a B for Value and Stability. Within the same industry, it is ranked #13.
To see NINOY’s additional POWR Ratings for Growth, Sentiment, and Quality, click here.
Stock #1: Photronics, Inc. (PLAB)
PLAB is a global manufacturer and seller of photomask products used in the production of integrated circuits and flat panel displays. The company serves semiconductor and FPD manufacturers worldwide, offering essential components for transferring circuit patterns onto semiconductor wafers and FPD substrates.
PLAB’s trailing-12-month EBIT margin of 28.37% is 476.2% higher than the industry average of 4.92%. Its 37.43% trailing-12-month EBITDA margin is 304.7% higher than the 9.25% industry average.
In the fourth quarter, which ended October 31, 2023, PLAB reported revenue of $227.47 million, up 8.2% year-over-year. The company's non-GAAP net income and EPS grew 19.7% and 17.6% from the previous-year quarter to $37.25 million and $0.60, respectively.
Moreover, its cash, cash equivalents, and restricted cash at the end of the period amounted to $501.87 million, up 55.7% from the prior-year quarter.
For the first quarter of fiscal 2024, the company anticipates revenue in the range of $217 million to $225 million. Additionally, the projected non-GAAP net income attributable to PLAB shareholders is expected to be in the range of $0.45 and $0.53 per share.
Street expects PLAB’s revenue and EPS to rise 4.2% and 22.5% year-over-year to $220 million and $0.49, respectively, for the first quarter ending January 2024. The company surpassed the revenue and EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 90.4% over the past nine months to close the last trading session at $31.37.
PLAB’s optimistic fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Momentum and a B for Value, Sentiment, and Quality. Within the same industry, it is ranked first.
To see PLAB’s additional POWR Ratings for Growth and Stability, click here.
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ROHCY shares were trading at $18.89 per share on Tuesday afternoon, up $0.42 (+2.27%). Year-to-date, ROHCY has gained 2.27%, versus a -0.53% 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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