For Immediate Release
Chicago, IL – April 28, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Analog Devices (NASDAQ: ADI – Free Report ), MagnaChip Semiconductor Corp. (NYSE: MX – Free Report ), MaxLinear, Inc. (NYSE: MXL – Free Report ), Maxim Integrated Products (NASDAQ:MXIM) (NASDAQ: MXIM – Free Report ) and Microchip Technology (NASDAQ: MCHP – Free Report ).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free .
Here are highlights from Thursday’s Analyst Blog:
5 Semiconductor Stocks That Warrant a Second Look
Much has been said about semiconductor stocks lately, with some of the opinion that the secular growth drivers will continue to push them up and others taking the more cautious approach that such appreciation may be risky because they are already fully valued. Neither position can be completely ruled out. But it may be worthwhile to drill down a little deeper to identify the names that still have upside potential.
And what better way than to start with than the Zacks Industry Rank, which is based on the philosophy that about half of a stock’s price movement can be attributed to the group (sub-industry) that it’s in. In fact, Zacks studies have shown that the top 50% of Zacks ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
So today, we are going to take a closer look at the semiconductor analog & mixed signal group , which is in the top 10% of Zacks-ranked industries.
The group has slightly outperformed the S&P 500, having appreciated 5.5% compared to the 4.8% for the S&P 500.
Sector revenues have grown in each of the last four years with the jump in 2016 being particularly high (up 31.4%). Gross profit (up 26.3% in 2016) and net income before non-recurring items (up 16.4%) show similar trends. However, the industry is investing heavily in R&D and SG&A (up 65.0% in 2016 although moving both ways in preceding years) and unlike in the past, it’s tapping into the debt market to do it (interest expenses are up 134.5% in 2016 and up double digits in each of the three preceding years.
A quarterly cross section shows revenues rising steadily from the Sep 2015 quarter. Gross profit dipped in the Mar 2016 quarter but barring that one quarter shows a rising trend from Dec 2014. Net income before non-recurring items has risen since Mar 2016. As with the annual trend, the quarterly performance shows rising operating expenses and capex spend (using depreciation as a proxy), as well as rising interest rates.
If you add the above data to secular growth drivers like machine learning, artificial intelligence, self-driving cars, IoT, industrial and medical technology, drones (the list is almost never-ending), it’s clear that this is a growth segment. So while momentum trading opportunities may be there in some cases, they may not be what value buyers are looking for.
So with that let’s jump to the picks for today-
Analog Devices (NASDAQ:ADI – Free Report )
Analog Devices, Inc. is one of the world leaders in the design, manufacture and marketing of high-performance analog, mixed-signal and digital signal processing integrated circuits used in signal processing applications. The technology is found in communications, cellular telephones, computers and computer peripherals, consumer electronics, automotive electronics, factory automation, process control and military and space systems.
Investment factors:
Zacks Rank #1 (Strong Buy) (You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .)
Growth Score B
-Revenue, gross profit and earnings before non-recurring items have improved over the past year while opex and interest expenses have shot up
-Earnings and revenues beat estimates in the last seven quarters, price reaction to earnings reports hasn’t always been positive
-Earnings estimates have increased significantly over the last 60 days
-The balance sheet debt has soared in the last six quarters, taking the debt cap ratio from 14.7% to 41.8%. The ROA, ROE and net cash per share have all improved nicely in this time period.
MagnaChip Semiconductor Corp. (NYSE:MX – Free Report )
MagnaChip Semiconductor Corporation is a designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. The company operates through the Display Solutions, Power Solutions and Semiconductor Manufacturing Services segments.
Display Solutions includes source and gate drivers and timing controllers that cover a wide range of flat panel displays used in LCD, LED and 3D televisions and displays, mobile PCs and mobile communications and entertainment devices.
The Power Solutions products include discrete and integrated circuit solutions for power management in high-volume consumer applications.
The Semiconductor Manufacturing Services segment provides specialty analog and mixed-signal foundry services for fabless semiconductor companies. MagnaChip Semiconductor Corporation is headquartered in Chungbuk, South Korea.
Investment factors:
-Zacks Rank #2 (Buy)
-Growth Score A, Value Score A, VGM Score A
-Gross profit shows steady upward trend since the Dec 2015 quarter, interest expense dropped off sharply in 2015, opex control improved in 2016
-Estimated losses have come down significantly in the last 30 days and the company is now expected to generate profits this year that will more than double next year
-The balance sheet is highly leveraged, ROE has improved significantly over the last two years ROA is improving although remains negative
MaxLinear, Inc. (NYSE:MXL – Free Report )
MaxLinear is a provider of radio-frequency analog and mixed signal semiconductor SoCs for broadband communication applications like its RF receivers and RF SoCs (that includes its integrated radio system architecture and the functionality necessary to demodulate broadband signals) to capture and process digital and broadband signals for decoding.
MaxLinear's current products enable the display of broadband video in a wide range of electronic devices, including cable and terrestrial set top boxes, digital televisions, mobile handsets, personal computers, netbooks and in-vehicle entertainment devices. MaxLinear is based in Carlsbad, California.
Investment factors:
-Zacks Rank #2 (Buy)
-Growth Score B
-Revenue, gross profit and earnings before non-recurring items plateaued at a significantly higher level in 2016
-Earnings beat estimates in the last six quarters, sales surprise has been erratic, price reaction to earnings reports hasn’t always been positive
-The company has no balance sheet debt, net cash per share has increased over the last two years
Maxim Integrated Products (NASDAQ:MXIM – Free Report )
Maxim Integrated Products, Inc. designs, develops, manufactures, and markets a broad range of linear and mixed-signal integrated circuits, commonly referred to as analog circuits. The company also provides a range of high-frequency design processes and capabilities that can be used in custom design.
Investment factors:
-Zacks Rank #2 (Buy)
-Growth Score B, Momentum Score A
-Revenue and gross profit look like they have plateaued although they remain at a significantly higher level than a couple of years ago. Opex discipline is evident, interest expense is steady, earnings before non-recurring items started upward trajectory last year
-Earnings beat estimates in the last six quarters, sales surprise started improving from the Sep quarter last year, price reaction to earnings reports is generally positive
Forward earnings estimates moved up recently
-Debt-cap ratio is just over 30%, net cash per share is nearly 3x what it was a couple of years ago
Microchip Technology (NASDAQ:MCHP – Free Report )
Microchip Technology, Inc. develops and manufactures specialized semiconductor products used by its customers for a wide variety of embedded control applications. Its product portfolio comprises microcontrollers; application-specific standard products; and related mixed-signal and memory products. The company markets its products to the consumer, automotive, office automation, communications and industrial markets.
Investment factors:
-Zacks Rank #2 (Buy)
-Growth Score A, Momentum Score B, VGM B
-Gross profit has increased in each of the last five quarters, Opex discipline is evident, Interest expense is up, earnings before non-recurring items has been increasing in last five quarters.
-Topped earnings estimates in five of the last six quarters, generally misses top line expectations (five of the last six quarters), price reaction to earnings reports has been positive since June last year.
-Forward earnings estimates are up from three months ago
-Debt-cap ratio is up significantly in last three years but remains decent at 54.9%
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Strong Stocks that Should Be in the News
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Analog Devices, Inc. (ADI): Free Stock Analysis Report
MagnaChip Semiconductor Corporation (MX): Free Stock Analysis Report
MaxLinear, Inc (MXL): Free Stock Analysis Report
Maxim Integrated Products, Inc. (MXIM): Free Stock Analysis Report
Microchip Technology Incorporated (NASDAQ:MCHP): Free Stock Analysis Report
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