Wednesday's IBD 50 Stocks To Watch pick, chip leader Rambus, is breaking out past a buy point. Boasting an RS Line Blue Dot from MarketSmith, Rambus stock is one of the best stocks in today's stock market.
Based in Silicon Valley, Rambus develops high-performance memory subsystems. The company provides interfaces and related technologies that chipmakers and systems companies use to maximize performance and security in data-intensive systems. Rambus' products deliver the increased bandwidth, capacity and security required to usher in a new era of data-center architectures.
To advance AI and machine learning, Rambus has announced a new high-bandwidth memory (HBM) system. The Rambus GDDR6 PHY delivers a data rate of up to 24 gigabits per second, providing 96 GB/s of bandwidth per GDDR6 memory device. The systems offers high-bandwidth memory performance for artificial intelligence, graphics and networking applications.
On May 1, Rambus said it earned 20 cents a share in the first quarter, an 11% increase vs. the year-ago period. Q1 revenue grew 15% to $113.8 million.
"Rambus delivered a strong first quarter with revenue and earnings at the high end of guidance, driven by continued execution and industry-leading products as we successfully navigate the near-term challenges in the market," said Luc Seraphin, Rambus chief executive, in the earnings release.
"We are well positioned to address the favorable secular trends in the data center, fueled by exciting advancements in AI and other demanding workloads, and drive the company's long-term profitable growth."
Rambus Stock Boasts Strong IBD Ratings
With a solid long-term earnings track record, Rambus stock has a great 97 out of 99 Earnings Per Share Rating, according to IBD Stock Checkup. This rating takes into account EPS growth and stability of earnings over the past three years, with the two most recent quarters weighed more heavily.
Rambus stock boasts a three-year EPS growth rate of 165%. While that torrid growth slowed in the most recent quarter, up just 11%, earnings growth is expected to rebound in the current quarter, with a 22% increase per FactSet estimates.
The company is also on track for big profits in 2023. Earnings are set to surge 73% to $1.76 per share, according to FactSet estimates. Annual earnings are forecast to grow an additional 18% in 2024.
RMBS stock boasts a perfect 99 IBD Composite Rating.
RMBS Is One Of The Best Stocks To Buy And Watch
Rambus stock rallied 1% midday Wednesday, moving further above a 51.98 buy point in a flat base, according to IBD MarketSmith, following Tuesday's breakout move. The 5% buy zone extends from the buy point up to 54.58.
Bullishly, the stock's relative strength line is at new highs amid this week's strong gains, triggering the RS line "Blue Dot." The RS Line Blue Dot identifies stocks whose relative strength lines are hitting new highs, while the stock is building a new base or breaking out past a buy point.
That's a bullish combination and a prime way to spot new market leaders.
Remember, the RS line measures a stock's price performance vs. the S&P 500 and is the blue line plotted on every IBD chart. If the market's down, good stocks will outperform by treading water or even rising. When the market rebounds, the stocks with the best relative strength should bounce back even stronger than the market.
With the stock market trend back in a confirmed uptrend, investors should be on the lookout for top stocks breaking out. Despite noting the better action in recent sessions, IBD's recommended exposure in stocks remains at 20% to 40% of your portfolio due to market uncertainty.
Still, Rambus' fundamental and technical strength makes it one of the best stocks in today's stock market.
Best Stocks To Buy And Watch
Three recent IBD 50 Stocks To Watch picks.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| Celsius | 122.34 | Cup base | |
| Hyatt | 118.02 | Cup with handle | |
| Kinsale Capital | 337.22 | Cup base |
Source: IBD Data As Of May 17, 2023
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
