Broadcom And 5 Other Top Semiconductor Stocks To Buy

Broadcom Limited (NASDAQ:AVGO) has been one of the most consistent performers in the semiconductor industry. Shares of this Zacks Rank #1 (Strong Buy) company have increased almost 16% on a year-to-date basis driven by robust revenue growth and expanding margins.

Broadcom’s latest quarterly results were impressive. Non-GAAP earnings (excluding share-based compensation expense) were $2.47 per share, which comfortably exceeded the Zacks Consensus Estimate by 8% (18 cents). We note that the company has posted positive earnings surprise of 7% over the trailing four quarters.

Per Bloomberg “The company’s earnings are an indicator of demand across the mobile phone, wireless and fixed-line and computer industries.” Management expects robust growth in the wireless unit which in turn will help the company meet fourth-quarter 2016 revenue target, which is currently pegged at $4.09 billion (+/- $75 million).

Broadcom has also witnessed significant earnings estimate revision over the last 60 days. The EPS estimate for the current year increased 4% (37 cents) to $9.69 per share over the last 60 days.

Wireless Key Growth Driver

Broadcom continues to focus on expanding its market share in the wireless connectivity market by effectively serving set-top box, wireless access, smartphone, laptop and notebook customers.

These products are a part of the consumer technology market, the retail sales of which per Consumer Technology Association’s (CTA) estimates will be driven by Internet of Things (IoT) this year to reach $286.6 billion. (Read More: Semiconductor Industry Outlook - September 2016)

With one of the most diversified communications platforms in the industry, Broadcom remains well poised for healthy long-term growth. Over the next 3-5 years, the company’s earnings are anticipated to increase at 15% rate.

Alternative Picks

Here we have picked five semiconductor stocks that have performed similar to Broadcom. They also have a favorable Zacks Rank #1 or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ambarella Inc. (NASDAQ:AMBA) : Headquartered in Santa Clara, CA, the company develops video compression and image processing semiconductors. The EPS estimate for the current year surged 19.4% (25 cents) to $1.54 per share over the last 60 days.

• Zacks Rank #1
• Year-to-date Return : 18.8%
• Last EPS Surprise: 400%
• Average 4-quarter Surprise: 91.96%
• Long term EPS Growth Estimate: 14.7%

Applied Optoelectronics Inc. (NASDAQ:AAOI) : Headquartered in Sugar Land, TX, the company designs, develops and manufactures advanced optical devices, packaged optical components, optical subsystems, laser transmitters and fiber optic transceivers. Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and Cisco Systems (NASDAQ:CSCO) are the key customers. Current year EPS estimate has soared 104% (26 cents) to 51 cents over the last 60 days.

• Zacks Rank #2
• Year-to-date Return : 24%
• Last EPS Surprise: 400%
• Average 4-quarter Surprise: 91.96%
• Long term EPS Growth Estimate: 18.3%

AXT Inc. (NASDAQ:AXTI) : Headquartered in Fremont, CA, the company designs, develops, manufactures and distributes high-performance compound semiconductor substrates also known as wafers. Over the last 60 days, its fiscal 2017 EPS estimates have surged a massive 225% (9 cents) to 13 cents per share.

• Zacks Rank #1
• Year-to-date Return : 92.7%
• Last EPS Surprise: 200%
• Average 4-quarter Surprise: 75%
• Long term EPS Growth Estimate: 20%

Cirrus Logic Inc. (NASDAQ:CRUS) : Austin, TX-based Cirrus Logic is a premier supplier of high performance analog circuits and advanced mixed-signal chip solutions. Apple (NASDAQ:AAPL) and Samsung Electronics (KS:005930) are the two major customers. Over the last 60 days, current year EPS estimate has increased 12.5% (32 cents) to $2.89 per share.

• Zacks Rank #1
• Year-to-date Return : 89%
• Last EPS Surprise: 94.1%
• Average 4-quarter Surprise: 49.62%
• Long term EPS Growth Estimate: 13%

Pixelworks Inc. (NASDAQ:PXLW) : San Jose, CA-based Pixelworks designs, develops and markets semiconductors and software that enable the visual display of broadband content through a wide variety of electronic devices. Hitachi Ltd. and Seiko Epson Corp are the major customers. Current year EPS estimate has narrowed to a loss of 33 cents per share from a loss of 38 cents over the last 60 days.

• Zacks Rank #2
• Year-to-date Return : 19%
• Last EPS Surprise: 45.5%
• Average 4-quarter Surprise: 30.26%
• Long term EPS Growth Estimate: 20%

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