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Deep Dive: These 16 chipmakers are expected to buck a dim industry trend

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During a difficult year for technology stocks, the main semiconductor index has fared even worse.

This is because investors don’t yet have a handle on how much of a slowdown in growth should be expected when chipmakers ramp production high enough to end the supply shortage.

But some companies are expected to maintain a solid pace for sales and earnings growth. They are listed below.

Read: Why semiconductor stocks are ‘almost uninvestable’ despite record earnings amid a global shortage

In the article above, Wallace Witkowski explains how investors and analysts think ahead and react quickly. During a year in which record profits for the semiconductor industry are expected, the iShares Semiconductor ETF
SOXX,
-3.80%
,
which tracks the industry benchmark PHLX Semiconductor Index
SOX,
-3.69%
,
was down 23% for 2022 through April 25, while the SPDR S&P 500 ETF Trust
SPY,
-1.88%

was down 9.9% and the Invesco QQQ Trust
QQQ,
-3.01%
,
which tracks the Nasdaq-100 Index
NDX,
-3.07%
,
was down 17.2%.

Loss of confidence in semiconductor stocks

For 2022, the SOXX group (30 stocks of chipmakers and manufacturers of related equipment) weighted by market capitalization is expected to increase sales by 18% and earnings per share by a whopping 42% from 2021 levels, based on consensus estimates among analysts polled by FactSet.

But 2021, fueled by government stimulus, is already ancient history. What if we look at estimates with 2022 as the base? Here are weighted aggregate sales per share and EPS estimates for SOXX, QQQ and SPY through 2024, with expected compound annual growth rates (CAGRs).

First, sales per share:

ETF

Ticker

Expected Sales CAGAR – 2022 through 2024

Estimated sales per share – 2024

Estimated sales per share – 2023

Estimated sales per share – 2022

iShares Semiconductor ETF

SOXX,
-3.80%

8.4%

$106.50

$98.44

$90.71

Invesco QQQ Trust

QQQ,
-3.01%

10.3%

$95.89

$86.29

$78.84

SPDR S&P 500 ETF Trust

SPY,
-1.88%

5.2%

$187.92

$178.42

$169.75

Source: FactSet

Many companies have fiscal years that don’t match the calendar. Estimates in this article are all for calendar years.

Now earnings per share:

ETF

Ticker

Expected EPS CAGAR – 2022 through 2024

Estimated EPS – 2024

Estimated EPS – 2023

Estimated EPS – 2022

iShares Semiconductor ETF

SOXX

7.1%

$30.25

$29.31

$26.37

Invesco QQQ Trust

QQQ,
-3.01%

13.3%

$17.54

$15.52

$13.67

SPDR S&P 500 ETF Trust

SPY,
-1.88%

9.9%

$27.65

$25.07

$22.90

Source: FactSet

For sales, SOXX is expected to be in the middle of the three, with a CAGR of 8.4% from 2022 through 2024. That’s a far cry from the 18% sales growth expected for 2022. But for EPS, the picture is worse, with an expected two-year CAGR of 7.1% ranking third, and comparing very unfavorably to the 42% EPS growth expected for 2022.

Companies that are potential exceptions

For a broad screen of semiconductor stocks listed in the U.S., we began with the SOXX 30 and then added all companies outside of SOXX in the S&P Composite 1500 Index
SP1500,
-1.68%

(made up of the S&P 500
SPX,
-1.86%
,
 the S&P 400 Mid Cap Index
MID,
-1.77%

 and the S&P 600 Small Cap Index
MID,
-1.77%

) in the “Semiconductors and Semiconductor Equipment” Global Industrial Classification Standard (GICS) industry group.

This gave us an initial screening group of 58 stocks.

These 16 companies are expected to show double-digit sales CAGR from 2022 through 2024.

First, here are the the group’s expected sales CAGR numbers, with sales estimates in millions:

Company

Ticker

Two-year estimated sales CAGR

Estimated revenue – calendar 2024

Estimated revenue – calendar 2023

Estimated revenue – calendar 2022

Wolfspeed Inc.

WOLF

37.4%

$1,670

$1,264

$885

First Solar Inc..

FSLR,
-0.72%

25.2%

$3,980

$3,298

$2,538

Enphase Energy Inc..

ENPH,
-3.29%

25.2%

$3,134

$2,610

$2,001

SiTime Corp.

SITM,
-5.19%

23.1%

$450

$366

$297

SolarEdge Technologies Inc..

SEDG,
-1.72%

21.9%

$4,319

$3,660

$2,906

Universal Display Corp.

OLED,
-4.90%

17.4%

$885

$736

$642

Marvell Technology Inc..

MRVL,
-3.92%

16.3%

$8,052

$7,115

$5,953

Taiwan Semiconductor Manufacturing Co. ADR

TSM,
-3.47%

16.2%

$97,315

$83,004

$72,103

Monolithic Power Systems Inc..

MPWR,
-5.52%

15.9%

$2,068

$1,785

$1,539

SunPower Corp.

SPWR,
-2.43%

15.8%

$2,089

$1,868

$1,558

Teradyne Inc..

TER,
-3.30%

15.2%

$4,610

$4,244

$3,474

Silicon Laboratories Inc..

SLAB

15.1%

$1,313

$1,160

$991

Nvidia Corp.

NVDA,
-5.90%

14.8%

$45,004

$40,096

$34,157

Micron Technology Inc..

MU,
-3.39%

14.0%

$47,026

$42,145

$36,212

ASML Holding N.V. ADR

ASML,
-6.09%

12.7%

$30,774

$27,832

$24,239

Advanced Micro Devices Inc..

AMD,
-5.50%

10.9%

$26,426

$24,068

$21,482

Source: FactSet

And now the group’s expected EPS CAGR:

Company

Ticker

Two-year estimated EPS CAGR

Estimated EPS – calendar 2024

Estimated EPS – calendar 2023

Estimated EPS – calendar 2022

Wolfspeed Inc.

WOLF

N/A

$2.27

$1.04

-$0.22

First Solar Inc..

FSLR,
-0.72%

251.4%

$4.11

$2.23

$0.33

Enphase Energy Inc.

ENPH,
-3.29%

25.3%

$5.04

$4.13

$3.21

SiTime Corp.

SITM,
-5.19%

21.3%

$5.35

$4.64

$3.63

SolarEdge Technologies Inc.

SEDG,
-1.72%

39.5%

$9.71

$7.93

$4.99

Universal Display Corp.

OLED,
-4.90%

24.4%

$7.08

$5.49

$4.57

Marvell Technology Inc.

MRVL,
-3.92%

24.1%

$3.44

$2.86

$2.23

Taiwan Semiconductor Manufacturing Co. ADR

TSM,
-3.47%

13.2%

$7.31

$6.27

$5.70

Monolithic Power Systems Inc.

MPWR,
-5.52%

16.1%

$13.05

$11.26

$9.67

SunPower Corp.

SPWR,
-2.43%

79.5%

$1.07

$0.67

$0.33

Teradyne Inc.

TER,
-3.30%

24.8%

$7.47

$6.74

$4.80

Silicon Laboratories Inc.

SLAB,
-3.34%

30.2%

$4.45

$3.37

$2.62

Nvidia Corp.

NVDA,
-5.90%

17.1%

$7.61

$6.59

$5.55

Micron Technology Inc.

MU,
-3.39%

13.4%

$13.82

$13.29

$10.74

ASML Holding NV ADR

ASML,
-6.09%

20.1%

$25.76

$22.13

$17.85

Advanced Micro Devices Inc.

AMD,
-5.50%

17.8%

$5.55

$4.69

$4.00

Source: FactSet

Click on the tickers for more about each company.

You should also read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.

It’s notable that a quarter of the companies on the list are focused on solar power generation, including First Solar Inc.
FSLR,
-0.72%
,
Enphase Energy Inc.
ENPH,
-3.29%
,
SolarEdge Technologies Inc.
SEDG,
-1.72%

and SunPower Corp.
SPWR,
-2.43%
.
Here’s a look at the transition of power plants to solar generation with battery storage that is already under way.

For investors with very long-term horizons, SOXX may be the best way to participate in the semiconductor industry. For others with a more tactical approach, the screen above may serve as a starting point for further research.

Don’t miss: Dividend Aristocrat stocks can help you keep ahead of inflation. These 15 take top prizes for raising payouts.

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