KEY POINTS

  • The semiconductor sector could be worth more than $1 trillion annually within the next decade.
  • On its revenue goal, Axcelis Technologies is a year ahead of schedule.
  • The stock’s prospects appear to be sound, based on Cohu’s mid-term financial projections.

The market for advanced computer chips continues to flourish in popularity and increase in value, so these 2 semiconductor growth stocks are a wise investment. The pandemic was evidence of that.  Many consumer goods, including game consoles and new automobiles, were impacted due to a lack of critical semiconductor components.

The global semiconductor industry was valued at $452 billion in 2021 and could reach over $1 trillion in annual value over the next decade. There is a lot of potential for investors to profit from that growth. So here are 2 semiconductor growth stocks to buy at a discount to their all-time highs amid the broader sell-off in the tech sector.

Axcelis Technologies

Axcelis Technologies (NASDAQ:ACLS) doesn’t manufacture any chips itself. Instead, it sells ion implantation equipment to some of the world’s major chipmakers, assisting in manufacturing. In addition, its Purion line of machines produces chips for various purposes, including automobiles and mobile devices.

Amid a record-breaking year for demand, manufacturers are rushing to expand capacity to catch up with supply shortages and meet future demand driven by more consumer products adopting digital capabilities. Consequently, Axcelis’s order backlog is at its highest on record, which suggests good prospects for future revenue and earnings.

Ahead of schedule

Axcelis expects to generate $850 million in revenue by the end of 2022. Reaching that goal would place the company over a year ahead of schedule. The firm’s profit margins are also very high, with $2.88 in earnings per share in 2021 and a potential increase of 53% to $4.41 this year, according to forecasts. It also has an attractive forward price-to-earnings ratio of 11.5. That P/E ratio is a 45% discount to the Nasdaq-100 technology index’s forward multiple of 20.9.

However, the stock wasn’t always this cheap; it’s down 39% from its all-time high as investors have fled from growth stocks in response to high inflation and a looming risk of recession. However, given the expected expansion of the chip sector over the next decade, taking a long-term view is essential. As a result, it continues developing new technologies and announced several equipment shipments for old and new clients in 2022.

Cohu

Cohu (NASDAQ:COHU) is a firm that provides critical equipment and services to chipmakers worldwide, as does Axcelis. It specializes in testing and handling. Thus, ensuring that the end user receives a high-quality product that functions as intended and is free of flaws.

Cohu employs artificial intelligence (AI) in its defect detection technology. AI technology can identify tiny structural flaws as small as five micrometers. A strand of human hair is about 70 micrometers thick for comparison. Cohu’s procedure is a game-changer in terms of innovation and especially when considering that its AI learns and improves with time.

Lucrative sectors

The automobile sector is one of the most lucrative for Cohu’s semiconductor-producing clients, who address many problems. During the pandemic, the firm shifted its attention to the automotive sector to assist with severe chip shortages in that industry. It made up more than half of Cohu’s income in 2021, but the business has since pivoted again, with mobility taking precedence and accounting for 16% of revenue in Q1 2022. Everything from 5G network connections to mobile displays and even microchips for virtual reality video can be considered mobility.

It demonstrates Cohu’s flexibility in a rapidly evolving sector. In 2021, the firm earned $887 million in revenue, up 39% from the previous year. Analysts’ expectations indicate that revenue will remain constant in 2022 and 2023 as Cohu consolidates one of its greatest eras ever. However, the firm recently raised its long-term earnings per share predictions higher, claiming that revenue and earnings per share would reach $1 billion and $4 each year over the next three to five years.

Now is the moment

Cohu stock has fallen 46% from its all-time high, which might provide a terrific entry point. On July 28, the firm will release second-quarter earnings results, in which case it should exceed expectations on revenue. Given the company’s first-quarter statement, it’s not surprising that the ordered backlog grew to a new record level.

However, the emphasis should remain on the long term because this $1.3 billion firm has a lot of potential to develop alongside other semiconductor growth stocks.

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