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Raymond James: 2 Chip Giants to Buy Now (and 1 to Avoid)
Semiconductors are one of the essential industries of the modern world, making as much as possible what we rely on or take for granted: internet access, high-speed computers with high-speed memory, even the thermostats that control our air conditioning – there are not many, technologically, non-semiconductor chips . The global chip semiconductor market was valued at more than $ 513 billion in 2019, and despite the worst the pandemic could do, the chip sector rose to $ 726 billion in 2020. It is a market based on an almost unlimited customer base; it is estimated that 2.5 billion people own at least one smartphone. This is 1 in 3 of the total world population, enough to ensure that the demand for semiconductor chips will never weaken. And with that in mind, Raymond James’ analyst Chris Caso sees that two chip giants are ready to make a profit this year – but one that investors should avoid. Let’s take a closer look. Advanced Micro Devices (AMD) The first chip inventory we are going to look at, AMD, is consistently ranked among the 20 largest chip manufacturers worldwide. The company ranked fifteenth last year, with $ 9.76 billion in total revenue. The top line rose by 45% in 2019, when AMD was eighteenth. AMD’s position in the industry is based on its high quality products, including microprocessors, motherboard disks and graphics processors. AMD’s Ryzen Mobile 4000 chip was the first 7nm x86 processor on the market. The chip business showed a solid second half in 2020, with revenues in Q3 and Q4 rapidly recovering the 1H20 decline and rising above 2019 level. Earnings in the fourth quarter soared, growing from 32 cents a share to an impressive $ 1.45 a share. For the whole of 2020, earnings are $ 2.06, compared to 30 cents for 2019. The strong second half boosted annual revenue to a company record, amplifying the growing demand in the computer, gaming and data center markets. AMD’s prospects have attracted Raymond James’ Chris Caso, who compares the company favorably with rival Intel. ‘We’ve been using the setback since the beginning of the year to get involved with AMD, which we expect to be a secular winner because of what we believe is a lasting technical advantage over Intel. We think the downside of the stock is driven by the improved sentiment that Intel will solve their manufacturing challenges, which will reverse AMD’s successes. We look at the other side of the view, “the 5-star analyst remarked. Caso continues:” Now that Intel is committed to internal manufacturing, we think it’s unlikely that Intel will ever have a transistor advantage over AMD and the current road maps will be recycled. ensures an advantage for AMD / TSMC until at least 2024. Meanwhile, we think the street numbers are too low for both servers and consoles, which puts our basic 2022 EPS estimate of $ 2.81 12% ahead of the street, with ‘ upside down about $ 3.00. “In line with these prospects, Caso’s Caso coverage began with better performance (ie Buy) and a $ 100 price target to represent an upward potential of 23% in one year. (Click here for Caso’s record Raymond James’ view is not a positive exception, AMD has 13 positive reviews on record, partly balanced by 5 Holds and 1 Sell, which makes the analyst’s consensus rating a moderate buy. of ~ 29% for the next 12 m recall (See AMD stock analysis on TipRanks.) Nvidia Corporation (NVDA) Nvidia, the next, is another giant in the chip sector, just like AMD, Nvidia is rising slowly According to the total sales, the company was number 10 in 2019 – and number 8 in 2020. Nvidia’s sales last year were more than $ 16 billion, a profit of 53% on an annual basis. achieved with the combination of memory chips – which have a strong market in the data center segment – and graphics processors – popular with hardcore gamers and professional graphic designers. For the most recent quarter, the fourth quarter of fiscal 2021, which ends December 31, Nvidia reported $ 5 billion in revenue, a company record and a 61% increase from the previous year. The EPS rose from $ 1.53 in the previous quarter to $ 2.31 in the current pressure, a gain of 51%. The year numbers were strong; the $ 16.68 billion at the top was a record, and the EPS, at $ 6.90, was 53% higher than the previous year. Enterprise management noted the strength of the data center segment, but also pointed out that Nvidia has a growing AI business. The company produces between 5% and 10% of its total sales in the automotive market, and more than half of it is AI-related, in the autonomous vehicle industry. Raymond James, Chris Caso, also notes this in his report which improves his position on NVDA. “Our call is not really new, because we’re been positive about NVDA for some time. Rather, our call is meant to express our conviction in the short and long term. In the short term, we believe that the NVDA results will be more dependent on supply than demand, given the large deficits – and we do expect the increase in the supply of the year … Our conviction in the longer term driven by the fact that NVDA has more shots on target than anyone else in our reporting, and their success in AI has given them a permanent seat at the table in both hyperscale and enterprise accounts, ‘Caso believes. Caso strengthens its stance from Outperform to Strong Buy and sets a price target of $ 750. At current levels, this indicates room for an upward return time of 17%. NVDA’s strong share valuation over the past 12 months (115%) has pushed the share price close to the average price target. Shares sold for $ 614.47, with an average target of $ 670.20, indicating room for growth of 9%. The stock nonetheless holds a consensus rating from Strong Buy, based on 22 Buys and 4 Hold given in recent weeks. (See NVDA stock analysis on TipRanks) Intel Corporation (INTC) The third stock we are looking at, Intel, is the one Raymond James says to avoid. This may seem contradictory; Intel is, according to sales, the world’s largest semiconductor chip maker, with more than $ 77 billion in annual revenue and a leading position in a $ 720 + billion market last year. Why then does Caso recommend caution here? “Intel’s share has risen due to optimism that the new leadership of their very capable new CEO will enable them to turn their production issues around and return to their previous dominance. Our underperformance rating reflects not only the risk that Intel will not achieve the goal, but also the pain they are likely to endure in the pursuit of the goal in terms of capital loss, lost market share and a shifting landscape in data centers operating the industry will make less dependent on Intel, “Caso explained. The analyst added:” In addition, we are concerned that demand in the PC market, on which Intel is still highly dependent, has been significantly pushed forward due to the pandemic, and we expect a final average reversal – which unfortunately can occur just as Intel has to increase investment. Caso, as noted, rates INTC as an underperformance (ie sell) and places no price target on it. All in all, the current view of the market on INTC is a mixed bag, indicating uncertainty regarding its outlook. The stock has a consensus rating from Hold Analyst, based on 12 buys, 10 investments and 8 sales. Meanwhile, the price target of $ 67.68 indicates a modest upside potential of almost 6%. (See INTC stock analysis on TipRanks) To find great ideas for chips for stocks that trade at attractive valuations, visit TipRanks’ best stocks to buy, a newly introduced tool that unites all TipRanks stocks. Disclaimer: The opinions expressed in this article are solely those of the proposed analysts. The content is for informational purposes only. It is very important to do your own analysis before making any investment.