The stock market has witnessed a massive sell-off on worries over the Federal Reserve’s aggressive interest rate hikes to tame the high inflation. Amid efforts to bring down the rising inflationary pressure, the central bank raised the interest rates by 75 basis points last month.
Moreover, increasing odds of a recession have spooked investors, leading to high market volatility. According to Morgan Stanley, the S&P 500 has yet to price in a full-blown economic recession. The S&P 500 witnessed its worst first six months since 1970.
Given this backdrop, we think quality stocks Broadcom Inc. (AVGO), Cirrus Logic, Inc. (CRUS), Renesas Electronics Corporation (RNECF), and Xperi Holding Corporation (XPER), which possess impressive growth attributes, could be solid additions to your portfolio. These stocks have been graded A for growth in our proprietary rating system.
Broadcom Inc. (AVGO)
AVGO designs, develops, and supplies various semiconductor devices, emphasizing complex digital and mixed-signal complementary metal oxide semiconductor-based devices and analog III-V-based products worldwide. The company has two operational segments, Semiconductor Solutions, and Infrastructure Software.
In May, AVGO announced an agreement under which AVGO will purchase all of the outstanding shares of VMware in a cash-and-stock transaction that values VMware at approximately $61 billion, based on the closing price of Broadcom common stock on May 25, 2022. Also, AVGO will assume $8 billion of VMware net debt.
In May, AVGO announced the delivery of its high bandwidth monolithic automotive Ethernet switch device, the BCM8958X, designed to address the increasing bandwidth need for in-vehicle networking applications and facilitate the adoption of software-defined vehicles (SDV).
The BCM8958X features 16 Ethernet ports, of which up to six are 10 Gbps capable, as well as integrated 1000BASE-T1 and 100BASE-T1 PHYs, providing higher flexibility and switching capacity needed to support automotive zonal electronic control unit (ECU) and central compute ECU architectures.
During the second quarter ending March 31, 2022, AVGO’s Non-GAAP net revenue increased 23% year-over-year to $8.10 billion. Its operating income grew 71.8% from its year-ago value to $3.39 million, while its Non-GAAP net income improved significantly from its prior-year quarter to $4.00 billion. The company’s EPS rose 37% year-over-year to $9.07.
The $9.55 consensus EPS estimate for the third quarter, ending July 2022, represents a 37.2% improvement year-over-year. Analysts expect its revenue to increase 24% year-over-year to $8.41 billion for the same period. In addition, it has an impressive earnings history as it surpassed the consensus EPS estimate in all of the trailing four quarters.
AVGO’s revenue has grown at a CAGR of 13% over the past five years. Furthermore, the company’s EBITDA has grown at a CAGR of 18.4% over the past three years.
AVGO's POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has an A grade for Growth and Quality and a B grade for Sentiment. Within the B-rated, 96-stock Semiconductor & Wireless Chip industry, AVGO is ranked #8.
To see additional POWR Ratings for Stability Momentum and Value for AVGO, click here.
Cirrus Logic, Inc. (CRUS)
CRUS is a fabless semiconductor company that offers low-power and high-precision mixed-signal processing solutions in the United States and internationally. It offers portable products, including codecs components that integrate analog-to-digital converters (ADCs) and digital-to-analog converters (DACs) into a single integrated circuit (IC).
For the fourth quarter ending March 26, 2022, CRUS’ net sales increased 32.2% year-over-year to $290.66 million. The company’s income from operations grew 67% from its year-ago value to $489.97 million, while its net income improved 281.4% from its prior-year quarter to $96.41 million. The company’s EPS rose 290.5% year-over-year to $1.64.
Analysts expect CRUS’ revenue to increase 32.3% year-over-year to $366.72 million in the first quarter ending June 2022. The consensus EPS estimate of $0.83 for the first quarter ending June 2022 represents a 53.4% improvement year-over-year. Moreover, it has an impressive earnings history as it surpassed the consensus EPS estimate in all of the trailing four quarters.
CRUS’ revenue has grown at a CAGR of 14.5% over the past three years. Furthermore, the company’s EBITDA has grown at a CAGR of 34.6% over the past three years.
CRUS' strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system. The stock also has an A grade for Growth and a B for Quality and Value. Within the Semiconductor & Wireless Chip industry, it is ranked #5 of 96 stocks.
In total, we rate CRUS on eight different levels. Beyond what we've stated above, we have also given CRUS grades for Stability, Sentiment, and Momentum. Get all the CRUS ratings here.
Renesas Electronics Corporation (RNECF)
Headquartered in Tokyo, Japan, RNECF researches, designs, manufactures, sells, and services semiconductors in Japan, China, North America, Europe, the rest of Asia, and internationally. The company operates through Automotive Business and Industrial/Infrastructure/IoT Business segments.
Last month, RNECF announced that they have collaborated to deliver voice user interface (VUI) solutions for customers using Renesas’ entire RA MCU line.
Renesas RA customers will now have complimentary access to Cyberon’s industry-leading continuous command-based VUI toolchain, enabling them to add voice recognition to a variety of endpoint applications in home appliances, building automation, industrial automation, wearables, and many more.
Also, last month, RNECF announced a strategic partnership with Tata Motors Ltd. (TML) and Tejas Networks Ltd. (Tejas), both Tata Group companies, on the design, development, and manufacturing of Renesas’ semiconductor solutions for improving innovation across electronics systems for the Indian and emerging markets.
These joint attempts extend the companies’ long standing relationship as technology and business partners, including the recently announced next-generation EV Innovation Center (NEVIC) together by Renesas and Tata Group’s Tata Elxsi in March 2022.
RNECF’s revenue increased 70.2% year-over-year to ¥346.70 billion ($2.55 billion) for the first quarter ending March 31, 2022. Its operating profit grew 231.5% from its year-ago value to ¥100.08 billion ($3.36 billion), while its total comprehensive income improved 93.1% from its prior-year quarter to ¥190.17 billion ($6.38 billion).
Analysts expect RNECF’s revenue to increase 38.5% year-over-year to $2.76 billion in the second quarter ending June 2022.
XPER’s revenue has grown at a CAGR of 9.6% over the past three years. Furthermore, the company’s EBITDA has grown at a CAGR of 30.5% over the past three years.
It is no surprise that RNECF has an overall A rating, equating to Strong Buy in our POWR Ratings system. RNECF has an A grade for Growth and a B grade for Stability and Value. In the same industry, it is ranked #9 of 96 stocks
Click here to see the additional POWR Ratings for RNECF (Sentiment, Momentum, and Quality).
Xperi Holding Corporation (XPER)
XPER and its subsidiaries function as a consumer and entertainment product/solutions licensing company worldwide. It has two operational segments, the Intellectual Property Licensing segment, which primarily licenses its innovations to companies in the entertainment industry under the Adeia brand; and the Product segment, which includes Pay-TV that delivers user experience (UX) solutions. It has a market capitalization of $1.81 billion.
Recently XPER announced the acquisition of Vewd Software Holdings Limited (Vewd) for $109 million through a mixture of cash and debt. Vewd is a leading global provider of over-the-top (OTT) and hybrid TV solutions that ship in more than 30 million connected TV devices annually.
The acquisition makes XPER a leading independent streaming media platform through its TiVo brand and the leading independent provider of Smart TV middleware globally.
In May, XPER and LAPIS Technology Co., Ltd., a ROHM Group subsidiary, announced an agreement that includes a technology transfer of Adeia’s DBI Ultra die-to-wafer hybrid bonding know-how to support the development and deployment of the technology into LAPIS’s product portfolio. The agreement also includes Adeia’s foundational hybrid bonding patent portfolio license.
In April, TiVo, a wholly-owned subsidiary of XPER, announced that its prominent streaming products, TiVo Stream 4K and TiVo Stream OS, have expanded their premium Live TV offerings through integration with YouTube TV.
Through this integration with YouTube TV, the premium live streaming service TiVo can improve its consumer experience by offering TiVo Stream 4K users to stream more than 85 live sports, entertainment, and news channels.
For the first quarter ending March 31, 2022, XPER’s revenue increased 16.2% year-over-year to $257.42 million. Its operating income increased 409.4% year-over-year to $52.97 million, while the non-GAAP net income amounted to $102.68 million. The company’s non-GAAP EPS amounted to $0.92.
The consensus EPS estimate of $0.38 for the fourth quarter ending December 2022 indicates a 25.2% improvement year-over-year. Analysts expect XPER’s revenue to increase 1.7% year-over-year to $223.19 million in the third quarter ending September 2022. Moreover, it has an impressive earnings history, as it surpassed the consensus EPS estimate in three of the trailing four quarters.
XPER’s revenue has grown at a CAGR of 27.9% over the past three years. Furthermore, the company’s EBITDA has grown at a CAGR of 21.1% over the past three years.
XPER’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Growth and a B for Sentiment and Quality. In the same industry, it is ranked #4.
Beyond what we’ve stated above, we have also given XPER grades for Value, Momentum, and Stability. Get all the XPER ratings here.
AVGO shares were trading at $481.32 per share on Wednesday morning, up $5.02 (+1.05%). Year-to-date, AVGO has declined -26.57%, versus a -18.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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