The semiconductor industry’s long-term growth is expected to be driven by increased usage in electronic devices and emerging technologies such as AI and IoT. Given the industry’s growth prospects, fundamentally strong semiconductor stocks Tower Semiconductor Ltd. (TSEM), Everspin Technologies, Inc. (MRAM) and ChipMOS TECHNOLOGIES INC. (IMOS) could be ideal buys for solid returns.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the semiconductor industry.
The Semiconductor Industry Association (SIA) reported that global semiconductor industry sales totaled $48 billion in November 2023, up 5.3% from $45.6 billion in November 2022 and 2.9% from the October 2023 total of $46.6 billion.
Demand for semiconductors remains as strong as ever. The semiconductor market is expected to expand due to the growing consumer electronics industry, technological advancements, and investment, as well as rising demand from the automotive sector. The market is expected to reach $1.21 trillion by 2029, with a CAGR of 10.9%.
In addition, according to Gartner, Inc.’s most recent forecast, global semiconductor revenue will expand 16.8% to $624 billion in 2024. Moreover, investors’ interest in chip stocks is evident from the Invesco Dynamic Semiconductors ETF (PSI) 34.7% returns over the past nine months.
Considering these conducive trends, let’s look at the fundamentals of the three Semiconductor & Wireless Chip stocks, starting with number 3.
Stock #3: Tower Semiconductor Ltd. (TSEM)
Headquartered in Migdal Haemek, Israel, TSEM is an independent semiconductor foundry, focusing on specialty process technologies to manufacture analog intensive mixed-signal semiconductor devices internationally. It provides various customizable process technologies, a design enablement platform for quick and accurate design cycles, as well as transfer optimization and development process services.
TSEM’s forward non-GAAP PEG of 0.97x is 53.5% lower than the industry average of 2.09x. Its forward Price/Sales of 2.22x is 23.4% lower than the industry average of 2.90x.
TSEM’s trailing-12-month net income margin of 37.17% is significantly higher than the industry average of 1.92%. Its trailing-12-month ROCE of 26.72% is significantly higher than the industry average of 1.29%.
In the fiscal third quarter, which ended on September 30, 2023, TSEM’s revenues amounted to $358.17 million, while its operating profit increased 357.2% year-over-year to $362.16 million.
The company’s net profit and EPS came in at $342.05 million and $3.07, up 394.8% and 395.2% from the prior-year quarter, respectively. Furthermore, during the same period, TSEM’s total current assets stood at $1.72 billion, up 19.4% compared to $1.44 billion as of June 30, 2022.
Analysts expect TSEM’s revenue to come in at $1.40 billion for the year ending December 2024. Its EPS is expected to come in at $2.04 for the same period. The stock has gained 22.4% over the past three months to close the last trading session at $28.68.
TSEM’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TSEM has a B grade for Value, Momentum, Sentiment and Quality. Within the Semiconductor & Wireless Chip industry, it is ranked #7 out of 91 stocks. To see additional POWR Ratings for Growth and Stability for TSEM, click here.
Stock #2: Everspin Technologies, Inc. (MRAM)
MRAM manufactures and sells magnetoresistive random access memory (MRAM) products, including Toggle MRAM, spin-transfer torque MRAM, and tunnel magnetoresistance sensor products. The company serves original equipment, contract, and design manufacturers.
MRAM’s trailing-12-month non-GAAP P/E of 16.50x is 34.7% lower than the industry average of 25.25x. Its trailing-12-month EV/EBITDA of 10.81x is 31% lower than the industry average of 15.66x.
MRAM’s trailing-12-month ROCE of 17.68% is significantly higher than the industry average of 1.29%. Its 12.22% trailing-12-month ROTA is significantly higher than the 0.33% industry average.
For the third quarter that ended September 30, 2023, MRAM’s revenue increased 8% year-over-year to $16.47 million. Its adjusted EBITDA rose 18.7% from the year-ago value to $4.01 million.
Furthermore, the company’s net income and comprehensive income grew 27.8% from the prior year’s quarter to $2.44 million, while net income per common share increased 22.2% from the year-ago value to $0.11.
Street expects MRAM’s revenue to increase marginally year-over-year to $64.15 million for the year ending December 2024. Its EPS is expected to come in at $0.51 for the same period. It surpassed EPS estimates in all four trailing quarters. MRAM’s shares have gained 30.2% over past nine months to close the last trading session at $8.58.
It’s no surprise that MRAM has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Sentiment and a B for Value and Quality. It is ranked #3 in the same industry.
Beyond what is stated above, we’ve also rated MRAM for Growth, Stability and Momentum. Get all MRAM ratings here.
Stock #1: ChipMOS TECHNOLOGIES INC. (IMOS)
Headquartered in Hsinchu, Taiwan, IMOS researches, develops, manufactures, and sells high-integration and high-precision integrated circuits, and related assembly and testing services.
IMOS’ forward EV/Sales of 1.66x is 42.5% lower than the industry average of 2.88x. Its forward EV/EBITDA of 5.37x is 65.7% lower than the industry average of 15.66x.
IMOS’ trailing-12-month CAPEX / Sales of 16.48% is 596.6% higher than the 2.37% industry average. Its trailing-12-month ROTA of 3.62% is significantly higher than the 0.33% industry average.
For the fiscal third quarter, which ended on September 30, 2023, IMOS’ revenue increased 6.2% year-over-year to NT$5.58 billion ($177.84 million), while its gross profit rose 9.5% from the year-ago value to NT$889.08 million ($28.34 million).
The company’s attributable net profit and EPS came in at NT$580.60 million ($18.50 million) and NT$0.80, respectively. In addition, its operating profit grew 22.7% from the prior-year quarter to NT$487.15 million ($15.53 million).
The consensus revenue estimate of $761.20 million for the year ending December 2024 reflects a 11.6% rise year-over-year. The stock has gained 18.3% over the past six months to close the last trading session at $26.50.
IMOS has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
IMOS’ is ranked first in the same industry. It has a B grade for Momentum, Growth, Value, Sentiment and Stability. To see additional IMOS’ ratings for Quality, click here.
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TSEM shares were trading at $28.44 per share on Monday afternoon, down $0.24 (-0.84%). Year-to-date, TSEM has declined -6.82%, versus a 3.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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