Earlier this week Advanced Micro Devices Inc (NASDAQ:AMD) announced that it had lowered its revenue and gross margin estimates for the second quarter, which caused a stock slide of 15.38% for day on Tuesday. The company said that it estimates revenues to have an 8% decrease for the quarter, which is even worse than the original estimated decrease of 3%, plus or minus 3%. In regards to gross margin, the company estimates a 28% margin, also lower than original estimates that had gross margin estimated at 32% for the quarter.
AMD is in the midst of shifting its focus towards gaming and low-power servers, but progress has not advanced as quickly as expected, causing the drops in revenue and margins.
With a high Zacks Industry rank of 88/265 (top 33%), AMD finds itself in an industry that is very solid as a whole. Despite AMD’s struggles, there are several other stocks that are in much better positions at present. These stocks make for intriguing investment opportunities. Although AMD is currently a Zacks Rank #3 (Hold), the following 3 semiconductor stocks are much better options for investment, and warrant legitimate consideration as a potential addition into any investor’s portfolio.
Ambarella Inc (NASDAQ:AMBA)
A developer of video compression and image processing semiconductors, Ambarella Inc. is one of the best stocks in the industry at the moment. In addition to being a Zacks Rank #1 (Strong Buy), the company is projected to see significant growth in sales and earnings in the near future.
Ambarella has projected sales growth of 45.84%, and with an extremely favorable net margin of 25.83%. Increases in sales means increases in profits for the company, and for potential investors. The company is also projected to see major growth in earnings based off of estimates, with a year over year growth estimate of 67.20% for the current year. Ambarella is likely to reach and even surpass its earnings estimates though, especially if the last 4 quarters are any indicator. The company has seen substantial beats on our earnings estimates in each of the last 4 quarters, with the average beat being 35.63%.
On another positive note, a recent acquisition will diversify and potentially provide a major boost for Ambarella’s revenue stream moving forward. The company announced that it is buying VisLab, an autonomous vehicle technology company, for $30 million. The autonomous vehicle industry is in its early stages of development but has the potential to grow substantially in the future as it matures and advances.
Avago Technologies Limited (NASDAQ:AVGO)
Fellow semiconductor developer and supplier Avago Technologies is another solid option for investment in the semiconductor industry. The company holds a Zacks Rank #2 (Buy) at the moment, and has several strong figures that tend to indicate a strong stock with potential for success.
While not as high as Ambarella’s, Avago similarly has a solid net margin of 10.90%, meaning that if the projected sales growth figure of 60.80% is correct, net income should be able to grow and bring solid amounts of profits.
Avago’s earnings estimates also are estimated to grow significantly, with the year over year growth estimate currently standing at 74.15% for the current year. In addition, analysts are upping their estimates for the current year, with 5 analysts doing so for the current year in the last 60 days. Avago has also been consistent in beating estimates for the company’s earnings. Evidence of this is the fact that the company has posted positive beats in each of the last 4 quarters by an average of 19.23%.
Synaptics Incorporated (NASDAQ:SYNA)
Last, but definitely not least, is Synaptics Inc, a leading developer of human interface solutions for a wide variety of mobile computing and communications devices. The company is a leading supplier of TouchPads to the notebook computer market. As a Zacks Rank #2 (Buy) and as a company who has seen solid earnings beats in its recent past, Synaptics is currently a viable option for investment. Synaptics also has very recently released a new product, previously unseen in the industry, which may help to boost the company’s potential moving forward.
In 3 of the last 4 quarters, Synaptics has been able to not only meet, but beat the earnings estimates made for the company by analysts by an average of 14.44%. The past two quarters have produced positive surprises and it can be assured Synaptics will be looking to continue its positive earnings surprise streak to a third quarter.
Synaptics has a year over year earnings growth estimate of 32.43% for the current year, and of 30.49% for next year, but that growth may be even larger than current projections if the the company’s newly released product is very beneficial. Just as recently as July 9th, the company released its new and innovative Match-in-Sensor ™ fingerprint authentication technology, which is the industry’s first fully hardware encapsulated fingerprint sensor and matching system. As the first fingerprinting technology with full isolation from host-operating software, the Match-in-Sensor technology gives Synaptics an advantage over its competition, and could serve as a major revenue booster moving forward.
Bottom Line
While AMD may struggle with company restructuring and a change of company focus, the semiconductor industry as a whole remains strong, with several companies other than AMD being more than viable options for investment. Ambarella Inc., Avago Technologies and Synaptics Inc. are three of the better stocks in the industry, and a lack of consideration to these stocks could be a costly mistake as the three semiconductors are poised to “program” serious profits into investment portfolios in the near future.