The chip industry is poised to stay resilient, owing to soaring demand for chips across diverse sectors, rapid technological advancements, and government support. To that end, let’s explore chip stocks Marvell Technology (MRVL), NVIDIA Corporation (NVDA), and ChipMOS TECHNOLOGIES (IMOS), poised for substantial growth in 2024. Read on….
The importance of semiconductors in today’s tech-reliant society can’t be understated. The chip industry is anticipated to thrive amid lucrative government investments and continuous technological innovation, resulting in the creation of advanced chips that cater to diverse industry requirements.
Given the industry’s promising prospects, on this piece, we assessed three chip stocks to find out how they might help investors tap into the industry’s tailwinds.
While chip stock ChipMOS TECHNOLOGIES INC. (IMOS) may very well be a sensible portfolio addition in 2024, I believe Marvell Technology, Inc. (MRVL) and NVIDIA Corporation (NVDA) ought to be kept on one’s watchlist for higher entry opportunities.
Before delving deeper into the basics of the three stocks possessing substantial growth potential, let’s take a fast take a look at the industry landscape.
The semiconductor industry demonstrated remarkable resilience in the course of the latter a part of 2023. In keeping with the Semiconductor Industry Association (SIA), global semiconductor sales stood at (*3*)$526.80 billion in 2023, and market growth is predicted to succeed in double digits in 2024, attesting to the industry’s strength in the present 12 months.
Significant advantages, observed from recent subsidies announced by the Biden administration, have significantly boosted chip production inside the U.S., helping the country maintain a competitive edge globally. The subsidies, a component of the Chips and Science Act, aim to allocate $53 billion to support the development of the chip manufacturing plants. This move enables firms to develop finer semiconductors, thereby enhancing sectors like AI and military technology.
Recent mergers and acquisitions have significantly broadened the industry’s product range, reinforced the market presence of firms, and significantly augmented chip market growth.
Moreover, expansions in cutting-edge logic and foundry capability, applications in generative AI and high-performance computing (HPC), and resurgent end-demand for chips expand the chance window for further expansion within the chip industry.
The worldwide semiconductor chip market is anticipated to succeed in $1.12 trillion, growing at a CAGR of seven.1% by 2032.
Considering these conducive trends, let’s take a look at the basics of the three Semiconductor & Wireless Chip stocks, starting with number 3.
Stock #3: Marvell Technology, Inc. (MRVL)
MRVL provides data infrastructure semiconductor solutions, spanning the information center core to the network edge. The corporate develops, scales complex System-on-a-Chip architectures, integrating analog, mixed-signal, and digital signal processing functionality.
On January 31, MRVL paid its shareholders a quarterly dividend of $0.06 per share of common stock. Its annualized dividend rate of $0.24 per share translates to a dividend yield of 0.35% on the present share price. Its four-year average yield is 0.52%. The corporate has paid dividends for 11 consecutive years.
On December 6, 2023, MRVL delivered two optical PAM4 digital signal processors (optical DSPs), Perseus and Marvell Spica Gen2, to enable cloud operators to serve the exploding demand for AI, accelerated computing, and cloud services by optimizing the performance, bandwidth, and efficiency of the optical links connecting data infrastructure.
MRVL has long been on the forefront of expanding the applications and use cases for optical inside data centers. Perseus and Spica Gen2 represent the most recent steps in that voyage.
MRVL’s trailing-12-month money from operations of $1.18 billion is significantly higher than the industry average of $81.24 million. Its trailing-12-month EBITDA and levered FCF margins of 18.17% and 26.84% are 101.5% and 210.2% higher than the industry averages of 9.02% and eight.65%, respectively.
Over the past three and five years, its revenue grew at CAGRs of 23.9% and 15%, respectively, while its total assets grew at 26.1% and 16.2% CAGRs over the identical periods.
For the fiscal third quarter that ended October 28, 2023, MRVL’s net revenue and non-GAAP gross profit stood at $1.42 billion and $859.20 million, respectively. For a similar quarter, its non-GAAP net income and non-GAAP net income per share stood at $354.10 million and $0.41, respectively.
Furthermore, for the identical quarter, its money and money equivalents at end of period increased marginally year-over-year to $725.60 million.
Street expects MRVL’s revenue and EPS for the fiscal fourth quarter of 2024 (ended January 2024) to extend marginally year-over-year to $1.42 billion and $0.46, respectively. The corporate surpassed consensus revenue estimates in each of the trailing 4 quarters and consensus EPS estimates in three of the trailing 4 quarters, which is impressive.
The stock has gained 69.3% over the past nine months to shut the last trading session at $69.37. Over the past 12 months, it has gained 48.3%.
MRVL’s fundamentals are reflected in its POWR Rankings. The stock has an overall C rating, equating to Neutral in our proprietary rating system. The POWR Rankings are calculated by considering 118 distinct aspects, with each factor weighted to an optimal degree.
The stock has a B grade for Growth and Sentiment. Throughout the 91-stock Semiconductor & Wireless Chip industry, it’s ranked #61.
To see additional POWR Rankings for Value, Momentum, Stability, and Quality for MRVL, click here.
Stock #2: NVIDIA Corporation (NVDA)
NVDA provides graphics, and compute and networking solutions within the U.S., Taiwan, China, and internationally. The corporate has two segments: Compute & Networking and Graphics.
On February 6, NVDA collaborated with Cisco (CSCO) to deliver AI infrastructure solutions for the information center which are easy to deploy and manage, enabling the large computing power that enterprises need to achieve the AI era.
CSCO, with its industry-leading expertise in Ethernet networking and extensive partner ecosystem, along with NVDA, the inventor of the GPU that fueled the AI boom, share a vision and commitment to assist customers navigate the transitions for AI with highly secure Ethernet-based infrastructure.
Working closely with CSCO, NVDA is making it easier than ever for enterprises to acquire the infrastructure they need to profit from AI, probably the most powerful technology force.
Its annualized dividend rate of $0.16 per share translates to a dividend yield of 0.02% on the present share price. Its four-year average yield is 0.10%. NVDA’s dividend payments have grown at a 1% CAGR over the past five years.
NVDA’s trailing-12-month money from operations of $18.84 billion is significantly higher than the industry average of $81.24 million. Likewise, its trailing-12-month ROCE, ROTC, and ROTA of 69.17%, 33.23%, and 34.88% are significantly higher than the industry averages of 1.45%, 2.46%, and 0.59%, respectively.
Over the past three and five years, its revenue grew at CAGRs of 44.8% and 29.3%, respectively, while its total assets grew at 26.3% and 31.7% CAGRs over the identical periods.
For the fiscal third quarter that ended October 29, 2023, NVDA’s revenue and non-GAAP gross profit increased 205.5% and 308% year-over-year to $18.12 billion and $13.58 billion, respectively. Furthermore, its free money flow stood at $7.04 billion, up significantly from the prior-year quarter.
For a similar quarter, its non-GAAP net income and non-GAAP net income per share stood at $10.02 billion and $4.02, up 588.2% and 593.1% from the year-ago quarter, respectively.
Street expects NVDA’s revenue and EPS for the fiscal fourth quarter of 2024 (ended January 2024) to extend 235.1% and 415.3% year-over-year to $20.27 billion and $4.53, respectively. The corporate surpassed consensus revenue and EPS estimates in each of the trailing 4 quarters.
The stock has gained 216.2% over the past 12 months to shut the last trading session at $700.99. Over the past nine months, it has gained 144.4%.
NVDA’s prospects are reflected in its POWR Rankings. The stock has an overall C rating, equating to Neutral in our proprietary rating system.
NVDA has an A grade for Growth and Sentiment and a B for Quality. Throughout the same industry, it’s ranked #22.
Beyond what we have stated above, we’ve got also rated the stock for Value, Momentum, and Stability. Get all rankings of NVDA here.
Stock #1: ChipMOS TECHNOLOGIES INC. (IMOS)
Headquartered in Hsinchu, Taiwan, IMOS researches, develops, manufactures, and sells high-integration and high-precision integrated circuits, and related assembly and testing services within the People’s Republic of China, Japan, Singapore, and internationally. It operates through Testing; Assembly; Testing and Assembly for LCD, OLED and Other Display Panel Driver Semiconductors; Bumping; and Others segments.
It pays an annual dividend of $1.50 per share, which translates to a dividend yield of 5.61% on the present share price. Its four-year average yield is 7.03%. IMOS’ dividend payments have grown at a 6.4% CAGR over the past three years.
IMOS’ trailing-12-month CAPEX/Sales of 16.48% is 590.7% higher than the industry average of two.39%. Its trailing-12-month EBITDA and net income margins of 29.44% and eight.04% are 226.5% and 267.8% higher than the industry averages of 9.02% and a couple of.19%, respectively.
IMOS’ revenue and EBITDA grew at 2.6% and 6.8% CAGRs, respectively, over the past five years. Over the past three and five years, its tangible book value grew at CAGRs of 6.8% and 6.9%, respectively, while its levered free money flow grew at 27.6% and 46.3% CAGRs over the identical periods.
IMOS’ revenue for January 2024 amounted to TWD1.71 billion ($54.45 million), representing a rise of 28.4% year-over-year.
For the fiscal third quarter that ended September 30, 2023, IMOS’ revenue and gross profit increased 6.2% and 9.5% year-over-year to TWD5.58 billion ($177.90 million) and TWD889.08 million ($28.34 million), respectively.
For a similar quarter, its profit for the period and earnings per share stood at TWD580.57 million ($18.50 million) and TWD0.80, respectively. As of September 30, 2023, IMOS’ total current assets stood at TWD20.08 billion ($639.86 million), in comparison with TWD16.01 billion ($510.19 million) as of September 30, 2022.
Street expects IMOS’ revenue for the fiscal first quarter ending March 2024 to extend 7.7% year-over-year to $161.36 million. The corporate surpassed consensus revenue estimates in three of the trailing 4 quarters.
The stock has gained 15% over the past three months to shut the last trading session at $26.74. Over the past six months, it has gained 13.9%.
IMOS’ robust prospects are reflected in its POWR Rankings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
IMOS has a B grade for Growth, Value, Momentum, and Stability. It’s ranked first inside the same industry.
Click here for the extra POWR Rankings for IMOS (Sentiment and Quality).
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NVDA shares were unchanged in premarket trading Thursday. 12 months-to-date, NVDA has gained 41.55%, versus a 4.79% rise within the benchmark S&P 500 index in the course of the same period.
Concerning the Creator: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a profession as an investment analyst following the completion of her bachelor’s degree in commerce. Currently enrolled within the CFA program, Neha is devoted to further enriching her comprehension of investment fundamentals.Neha’s primary objective is to help retail investors in discerning optimal investment opportunities by diligently evaluating crucial elements of economic instruments, with a primary deal with stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions within the dynamic world of finance.
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