The current global semiconductor shortage has impacted most industries, and the autonomous vehicles (AV) industry is no exception. However, governments worldwide have been implementing favorable policies to support the semiconductor industry, and companies have been ramping up production to meet the growing demand for chips.
AV-related technologies are far from being fully developed, but when they are they are expected to reduce crash injuries significantly. In addition, the COVID-19 pandemic highlighted the need for contactless self-driving technologies. According to a Precedence Research report, the global AV market is expected to grow at a 63.2% CAGR between 2021 – 2028. This should significantly increase the demand for semiconductors.
Investors’ interest in the semiconductor space is evidenced by the SPDR S&P Semiconductor ETF’s (XSD) 5.1% returns over the past month versus the SPDR S&P 500 ETF’s (SPY) 0.3% loss. Therefore, we think it could be wise to bet now on quality semiconductor stocks Intel Corporation (INTC), ON Semiconductor Corporation (ON), and NXP Semiconductors N.V. (NXPI). These three stocks are well-positioned for handsome gains with the growing demand for EVs.
Intel Corporation (INTC)
One of the established players in the technology space, INTC in Santa Clara, Calif., designs, manufactures, and sells essential technologies for the cloud, smart, and connected devices for its consumers across various sectors, including retail and industrial. Its segments include Data Center Group; Internet of Things Group; Mobileye; and Non-Volatile Memory Solutions Group.
On September 7, INTC’s Mobileye unveiled its 6-passenger, road-ready electric AV, which will be used for commercial driverless ride-hailing services in Tel Aviv and Munich beginning in 2022. In addition, it is the first AV to employ all features of the Mobility trinity. So, this launch could lead to increased sales for the company.
For its fiscal second quarter, ended June 26, 2021, INTC’s non-GAAP revenue came in at $18.50 billion, which exceeded its April guidance by $700 million. Its revenue from its Mobileye segment increased 124% year-over-year to $327 million, while revenue from its IOTG segment increased 47% year-over-year to $984 million. The company’s non-GAAP EPS was $1.28, which exceeded April guidance by $0.23.
INTC’s EPS is expected to grow at a 10% rate per annum over the next five years. In addition, it surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past year, the stock gained 10.3% in price to close yesterday’s trading session at $53.47.
INTC’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Value, and a B grade for Quality, Momentum, and Stability. Within the A-rated Semiconductor & Wireless Chip industry, INTC is ranked #15 of 98 stocks. To see the INTC’s ratings for Growth and Sentiment as well, click here.
ON Semiconductor Corporation (ON)
ON, together with its subsidiaries, manufactures and sells semiconductor components for various electronic devices worldwide. It operates through three segments: Power Solutions; Advanced Solutions; and Intelligent Sensing. In addition, it serves original equipment manufacturers, distributors, and electronic manufacturing service providers. On is headquartered in Phoenix, Ariz.
On August 25, ON and GT Advanced Technologies entered an agreement under which ON will acquire GTAT. The move could help expand ON’s silicon carbide capabilities and assure customer supply to meet the rapid ramp-up of the sustainable ecosystem, including EVs, EV charging, and energy infrastructure.
ON’s revenue increased 38% year-over-year to $1.67 billion for its fiscal second quarter, ended July 2, 2021. Its adjusted EBITDA grew 114.5% year-over-year to $453.10 million. Its non-GAAP net income increased 449.4% year-over-year to $275.80 million, and its non-GAAP EPS came in at $0.63, up 425% year-over-year.
Analysts expect ON’s EPS to be $2.47 in its fiscal year 2021, representing a 190.6% year-over-year increase. It surpassed consensus EPS estimates in each of the trailing four quarters. In addition, the company’s revenue is expected to increase 30% year-over-year to $1.71 billion for the quarter ending September 30, 2021. The stock has surged 117.4% in price over the past year to close yesterday’s trading session at $47.85.
It’s no surprise that ON has an overall B rating, which equates to a Buy in our POWR Ratings system. In addition, the stock has a B grade for Growth, Momentum, and Value.
NXP Semiconductors N.V. (NXPI)
Headquartered in Eindhoven, Netherlands, NXPI offers various semiconductor products internationally. The company’s product portfolio includes microcontrollers, communication processors, analog and interface devices, radio frequency power amplifiers, and security controllers. Its product solutions are used in a range of applications, including automotive, industrial and Internet of Things, mobile, and communication infrastructure.
In July 2021, NXPI and MOTER Technologies, Inc. announced a secure data exchange platform that links deep vehicle data to risk assessment and cost modeling to the insurance industry. Brian Carlson, Global Marketing Director for Vehicle Control and Networking Solutions at NXPI, said, “Our collaboration with MOTER demonstrates NXP’s solution-based approach that extends beyond silicon to provide a foundation for new automotive industry innovations and valued services.”
For its fiscal second quarter, ended July 4, 2021, NXPI’s revenue came in at $2.60 billion, representing a 42.9% year-over-year increase. The company’s non-GAAP operating income increased 121% year-over-year to $830 million. Its adjusted net income came in at $876 million, up 120.6% year-over-year. Also, its EPS was $1.42, versus a $0.77 loss in the prior year period.
For the quarter ending September 30, 2021, analysts expect NXPI’s EPS and revenue to increase 68.5% and 27.1%, respectively, year-over-year to $2.73 and $2.85 billion. In addition, it has surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 68.2% in price to close yesterday’s trading session at $211.48.
NXPI’s strong fundamentals are reflected in its POWR Ratings. The company has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, the stock has an A grade for Growth, and a B grade for Momentum and Quality.
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INTC shares were trading at $54.93 per share on Wednesday afternoon, up $0.41 (+0.75%). Year-to-date, INTC has gained 13.00%, versus a 20.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More…