2 flea shares to buy for a return, according to an analyst

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Expectations for two chip stocks,
ON Semiconductor

and
NXP Semiconductors
,
are now low enough to present a great buying opportunity, according to Raymond James.

The shares of chips have been volatile this month due to the evolution of the trade war. The month of August began with President Donald Trump's decision to impose a 10% tariff effective September 1, covering additional imports of $ 300 billion from China. But after a sharp decline in equity markets, including semiconductors, the US Trade Representative announced Tuesday that it would delay new tariffs on certain products until December 15, resulting in a reprise.

"And while the market is worried about macroeconomic weakness, the semi-reflected estimates already reflect this weakness for a year," wrote Monday Raymond James analyst Chris Caso. "We choose to put money to work on two names for which we believe the estimates have been drastically reduced and for which the valuation is remarkably attractive."

Caso has increased its rating for ON Semiconductor (ticker: ON) to Strong Buy in the Perform market. "While the current inventory correction has a negative impact on revenues in the immediate future, we believe that the situation allows a return to the average in 2020 once the stocks have been erased," he said. he writes.

The analyst began his ON price target at $ 21. He noted that stocks are only trading at about 10 times its estimated earnings for 2020 for the company.

The analyst also set up a cover for NXP Semiconductors (NXPI) with an Outperform rating and a price target of $ 115.

"We believe NXP has outsourced final market consumption, creating a favorable environment when demand picks up again," he wrote.

Write to Tae Kim at [email protected]