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Wells Fargo: 3 chip stocks to buy as 2021 approaches
Semiconductors are one of the essential industries of the modern world, making possible much of what we rely on or take for granted: Internet access, high-speed computers with high-speed memory, even thermostats. that control our air conditioning – a lot, technically, that doesn’t use semiconductor chips. With the end of 2020 in sight, it’s time for the annual stock valuation ritual for the new year. Wells Fargo analyst Aaron Rakers has taken a look at the chip industry, identifying several companies as potential winners next year. The analyst sees several factors combine to drive demand for chips in 2021, including the demand for cloud, new game consoles and market resolution for the future of the PC segment. Overall, however, Rakers expects memory chips and 5G-enabled chips to become industry drivers next year. The analyst expects semiconductor companies, as a group, to grow between 10% and 12% over the next 12 months, but that’s an average across the board. ‘industry. According to Raker, some chip companies will show significantly higher growth, in the range of 30% to 40% in the coming year. We can look at these companies, along with the latest TipRanks data, to find out what makes these chipmakers so compelling.Micron Technology (MU) Among the major chipmakers, Micron has taken a position in the memory segment. The company has seen its market capitalization jump to $ 78 billion this year, as stocks have appreciated 32% year-to-date. The boom is coming from a burgeoning product line on computer data storage, DRAM and flash storage. Look in 2020, Micron saw its revenue increase quarterly from $ 4.8 billion to Q1 at $ 5.4 billion in Q2 to $ 6.1 billion in Q3. Profit was 87 cents per share, down from 71 cents in Q2 and 36 cents in Q1. The third calendar quarter was Micron’s 4QFY20, and the full year showed a decline due to the COVID pandemic. Revenue was $ 21.44 billion, down 8.4% year-over-year, and operating cash flow fell to $ 8.31 billion , compared to $ 13.19 billion in FY19. During the last quarter, Micron’s 1QFY21, the company announced the release of the world’s first 176-layer 3D NAND chip. The new chip promises higher density and faster performance in flash memory, and the architecture is described as a “radical breakthrough.” The number of layers is 40% more than competing chips. Going forward, Micron has updated its F1Q21 forecast, forecasting total revenue of $ 5.7 billion to $ 5.75 billion. This is a 10% increase from previous forecasts. Well Fargo’s Aaron Rakers calls Micron his best semiconductor idea for 2021. He points to “an increasingly positive view of memory, and in particular the DRAM industry. DRAM accounts for approximately two-thirds of Micron’s revenue and over 80% of the company’s bottom line. In addition, Rakers notes “the performance of Micron’s technology – 1Znm DRAM leadership; recently described a 1αnm ramp through 2021, as well as Micron’s move to 3D NAND of the 2nd Generation 176-layer replacement gate to improve the cost curve. We would also like to highlight Micron’s performance on graphics memory (eg, GDDR6X), multi-chip packages (MCP), and high bandwidth memory (eg, HBME2) as positive. with a target price of $ 100. That figure suggests a growth margin of 41% in 2021. (To look at the Rakers’ track record, click here) Micron has recorded 24 recent reviews, spreading over 19 buys, 4 takes and 1 sell, and giving the stock a strong buy from analyst consensus. The shares are valued at $ 70.96 and recent appreciation has pushed them almost to the average price target of $ 74.30. But as the Rakers outlook suggests, there could be more than 4.5% upside available here. (See MU’s market analysis on TipRanks) Advanced Micro Devices (AMD) With $ 6.5 billion in total sales last year and a market cap of $ 110.7 billion, AMD is a giant company – but it’s not even in the top five world’s largest chipmakers. Yet AMD holds a strong position in the industry and its x86 processors offer fierce competition to the market leader Intel (INTC). AMD stocks have shown solid growth this year and rose 101% at the end of 2020. Growth in stocks has been based on steady income gains since the corona crisis peaked in the first quarter. AMD’s third-quarter revenue was $ 2.8 billion, up 55% from $ 1.8 billion in the last year’s quarter and surpassing 10% forecast. Profits, at 37 cents per share, were up 220% year-over-year. The company attributed the growth to strong results in the PC, gaming and data center product lines, and boasted that it was the fourth quarter in a row with revenue growth above 25% year-on-year. AMD last month announced a new product for the scientific research market, the Instinct MI100 Accelerator. The new chip is touted as the world’s fastest HPC GPU, and the first x86 server of its kind to exceed 10 teraflops in performance. We also believe that the deepening of AMD’s data center GPU strategy with the new Instinct MI100 GPUs and the release of the RoCM 4.0 software platform may become more and more visible as we progress through 2021. Executing AMD’s roadmap would remain an important goal – 7nm + Ryzen 4000 series, new RDNA Radeon Instinct datacenter GPUs (MI100 / MI120) and third generation 7nm + EPYC processors Milan… ”The Rakers’ position supports its buy rating, and its price target of $ 120 implies a 30% year-over-year increase in the stock. Analyst consensus on AMD reflects some residual caution on Wall Street. The 20 recent stock reviews include 13 buy, 6 take, and 1 sell. AMD shares are selling for $ 91.64 and, like Micron, their recent appreciation has closed the gap to the average price target of $ 94.71. (See AMD Stock Analysis on TipRanks) Western Digital Corporation (WDC) Closing Wells Fargo’s Choices on this List is Western Digital, a designer and manufacturer of memory systems. The company’s products include hard drives, SSDs, data center platforms, integrated flash drives, and portable storage including memory cards and USB drives. WDC had a tough year in 2020, with shares down 19% year-to-date. Still, the stock posted gains in November and December, on the heels of what was seen as a strong financial report in 1Q21. This earnings report showed revenue of $ 3.9 billion, in down 3% year-over-year, but the EPS net loss, at 19 cents, was a huge year-over-year improvement from the 93-cent net loss in the last year’s quarter. Improving earnings, which beat forecasts by 20%, was key for investors, and the stock is up 30% since the quarterly report. The company also generated strong cash flow in the quarter, with cash from operations increasing 111% sequentially. Wells Fargo’s Rakers acknowledges WDC’s struggles in 2020, but even so, he believes it’s action. which is worth the risk. has been our toughest constructive call of 2020 and while we believe that calling a bottom in NAND Flash (mid / 2H2021?) remains difficult and running WD in enterprise SSDs will remain choppy, our SOTP analysis lets us continue to believe that stocks present a risk / reward. We continue to believe that Western Digital can lead to a mid-cycle BPA history of ~ $ 7 / sh. +; However, we continue to believe that a key driver of this fundamental uptick will not only be a recovery in NAND Flash business, coupled with WD’s ability to see improved enterprise SSD performance, but also a continuing vision that WD’s hard drive gross margin can return to a sustainable level of 30% and above, ”Rakers said. To that end, Rakers awards WDC a Buy with a price target of $ 65. If the target is met, investors could pocket gains of 29% over the next few months. Where is the rest of the street side on this computer storage manufacturer? It generally looks bullish, as TipRanks analyzes show WDC as a buy. Out of 11 analysts followed in the last 3 months, 7 are bullish, while 4 remain on the sidelines. With a potential return of 9%, the consensual target price of the stock stands at $ 54.44. (See WDC Stock Analysis on TipRanks) To find great ideas for tech stocks that trade at attractive valuations, visit Top Stocks to Buy from TipRanks, a newly launched tool that brings together all the information about TipRank stocks. . only those of featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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