Wednesday's IBD 50 Stocks To Watch pick, chip stock leader Rambus, neared a new buy point during the ongoing stock market correction. RMBS stock boasts a relative strength line at new highs, as the stock rose 0.4% in afternoon trade Wednesday.
Based in Silicon Valley, Rambus develops high-performance memory subsystems. It 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.
On Feb. 6, Rambus missed Q4 2022 profit and sales estimates, earning an adjusted 14 cents per share on sales of $122.4 million. On a year-over-year basis, earnings fell 22% while sales climbed 33%.
Rosenblatt Securities analyst Kevin Cassidy reiterated his buy rating on Rambus stock after the report, posting a 12-month price target of 60. "The data center market is preparing for the first DRAM upgrade in nearly eight years," Cassidy said in a note to clients. "We see Rambus as poised to gain market share during this multiyear transition."
Chip Stock's IBD Stock Ratings
This chip leader has a middling 68 out of a perfect 99 Earnings Per Share Rating, according to IBD Stock Checkup. The EPS Rating takes into account the growth and stability of earnings over the past three years, with the two most recent quarters weighed more heavily in the calculation.
Rambus has a solid long-term earnings track record, with an impressive 157% five-year growth rate. While that positively impacts the EPS Rating, falling earnings in the latest quarter depress the rating.
Looking forward, annual earnings are expected to grow 48% in 2023 and 15% in 2024, according to FactSet.
As for the SMR Rating — which looks at sales, profit margins and return on equity — Rambus has a strong "B" rating. In the latest year, it booked a solid 20% pretax margin, with a mild 9% return on equity. And over the last three quarters, Rambus has grown sales by an average 38%.
Finally, RMBS stock boasts a perfect 99 IBD Composite Rating. This proprietary metric is designed to help investors easily measure the quality of a stock's fundamental and technical metrics.
Chip Stock To Watch: Rambus Eyes Buy Point
Rambus shares rose 0.4% Wednesday, trading just about 1% away from a flat base's 46.26 buy point, according to IBD MarketSmith chart analysis. If the stock breaks out in coming sessions, the buy range goes up to 48.57. But keep in mind the market correction should keep investors on the sidelines until a follow-through day signals the start of new uptrend.
Bullishly, the relative strength line hit a new high this week, exhibiting big outperformance vs. the S&P 500. An RS line at new highs confirms that Rambus is a top stock to watch in today's stock market.
Other IBD 50 Stocks To Watch
These are three recent IBD 50 Stocks To Watch picks. Meanwhile, chip stock leaders Allegro Microsystems and Nvidia are two IBD Leaderboard stocks. Both have posted big gains in recent weeks above buy points.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| Flywire | 29.41 | Consolidation | |
| Smartsheet | 48.55 | Consolidation | |
| Tractor Supply | 239.76 | Consolidation |
Source: IBD Data As Of March 22, 2023
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on top stocks to buy and watch and the stock market.
