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Wells Fargo: 3 chip supplies to buy when we’re on our way in 2021
Semiconductors are one of the essential industries of the modern world, making as much as we can 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 . With the end of 2020 in sight, it’s time for the annual ritual to evaluate the stocks for the new year. Aaron Rakers, an analyst at Wells Fargo, took a closer look at the chip industry and described several companies as likely lenders next year. The analyst sees several factors working together to increase demand for chips in 2021, including demand for clouds, new game consoles and a market resolution around the future of the PC segment. Overall, however, Rakers expect memory chips and 5G-enabled chips to appear as the drivers of the industry next year. The analyst expects semiconductor companies as a group to grow between the next 10 and 12% over the next 12 months, but this is an industry average. According to Raker, some chip businesses will show significantly higher growth, on the order of 30% to 40% in the coming year. We can look at these companies along with the latest TipRanks data to find out what makes these particular chip makers so compelling. Micron Technology (MU) Among the leading chipmakers, Micron has expanded its position in the memory segment. The company expanded its market capitalization to $ 78 billion this year, with shares up 32% to date. The increase comes in a product line that stores on the storage of computer data, DRAM and flash storage. In 2020, Micron saw revenue increase quarterly, from $ 4.8 billion in Q1 to $ 5.4 billion in Q2 to $ 6.1 billion in Q3. Earnings were 87 cents per share, compared to 71 cents in the second quarter and 36 cents in the first quarter. Micron’s third quarter was Micron’s 4QFY20, and the full fiscal year showed a decline due to the COVID pandemic. Revenue was $ 21.44 billion, down 8.4% year-on-year, and operating cash flow fell to $ 8.31 billion from $ 13.19 billion in FY19. During the past quarter, Micron’s 1QFY21, the company announced the release of the world’s first 176-layer 3D NAND chip. The new disk promises higher density and faster memory performance, and the architecture is described as a ‘radical breakthrough’. The number of layers is 40% higher than competing chips, and Micron has advanced its F1Q21 lead, predicting total revenue of $ 5.7 billion to $ 5.75 billion. This is an increase of 10% compared to the previous lead. Aaron Rakers of Wells Fargo calls Micron his best semiconductor idea for 2021. He points to an in-depth positive view of memory and in particular the DRAM industry. DRAM accounts for about two-thirds of Micron’s revenue and more than 80% of the company’s profits. In addition, Rakers notes on ‘Micron’s technological performance – 1Znm DRAM leadership; recently outlined the ramp from 1αnm to 2021, as well as the move from Micron to 176-layer 2nd-generation replacement gate 3D NAND to achieve improved cost curves. We will also highlight the performance of Micron on graphics memory (e.g. GDDR6X), Multi-Chip Packages (MCPs) and High-Bandwidth Memory (e.g. HBME2) as positive. Consistent with these comments, Rakers Micron shares are rating a buy, along with a price target of $ 100. This figure indicates room for 41% growth in 2021. (To view Rakers’ record, click here) Micron has 24 recent reviews on record, split at 19 Buys, 4 Holds, and 1 Sell, giving the stock a strong buy from the analyst’s consensus. Shares are priced at $ 70.96, and recent valuations have pushed it almost to the average price target of $ 74.30. But as Rakers predicts, there could be more than just 4.5% upside available here. (See MU stock analysis on TipRanks) Advanced Micro Devices (AMD) With $ 6.5 billion in total sales last year and a market capitalization of $ 110.7 billion, AMD is a giant enterprise – but it does not the top five of the world’s largest chipmakers. AMD still has a solid position in the industry and its x86 processors offer stiff competition for the leading Intel (INTC). AMD shares have shown solid growth this year and have risen by 101% as 2020 comes to an end. Equity growth has been driving due to steady income gains since the corona crisis peaked in the first quarter. AMD’s Q3 top line was $ 2.8 billion, 55% higher than the $ 1.8 billion recorded in the previous quarter, beating the forecast by 10%. Earnings, at 37 cents a share, rose 220% year-on-year. The company attributed the growth to solid results in the products, computers and data centers, and boasted that it was the fourth consecutive quarter with a growth of 25% per year, and AMD last month launched a new product for the scientific research market announced. the Instinct MI100 accelerator. The new chip is considered to be the world’s fastest HPC GPU, and the first such x86 server to exceed the performance of 10 teraflops. Rakers cover AMD for Wells Fargo: ‘We remain positive about AMD’s competitive position for continued gradual share gains in computers … We also believe that AMD’s deepening the GPU strategy for the center with new Instinct MI100 GPUs and the release of the RoCM 4.0 software platform may become increasingly visible as we move through 2021. The implementation of AMD’s roadmap would remain a major focus – 7nm + Ryzen 4000 series, new RDNA Radeon Instinct Center GPUs (MI100 / MI120), and the 3rd-gen 7nm + EPYC Milan processors … ”Rakers’ position supported its Buy rating, and its price target of $ 120 implies a one-year upward return of 30% to the stock. the analyst’s consensus view on AMD reflects some warning in Wall Street. The 20 recent reviews of the stock contain 13 buy, 6 holders and 1 sell. AMD shares sold for $ 91.64, and like Micron, their recent valuation narrowed the gap with the average price target of $ 94.71. (See AMD stock analysis on TipRanks) Western Digital Corporation (WDC). The Western Wells Fargo selection on this list is Western Digital, a designer and manufacturer of memory systems. The company’s products include hard drives, solid state disks, data center platforms, built-in flash drives and portable storage, including memory cards and USB thumb drives. WDC experienced a difficult year in 2020, with shares up 19% from last year. The stock continued to rise in November and December, on the heels of what was seen as a strong fiscal 1K21 report. The earnings report shows $ 3.9 billion in revenue, which was 3% lower than a year-on-year, but the EPS net The loss, by 19 cents, was a huge improvement over the net loss of 93 cents in the previous quarter. The earnings improvement, which beat the forecast by 20%, was key for investors and the share has risen by 30% since the quarterly report. The company also generated solid cash flow during the quarter, with cash from operations growing 111%, respectively. Wells Fargo’s Rakers acknowledge WDC’s problems in 2020, yet believe it’s a stock worth the risk. “Western Digital was our most difficult constructive call of 2020, and although we believe a bottom is needed in NAND Flash (mid / 2H2021?), It remains difficult and the implementation of WD in SSDs for enterprises will remain, our SOTP analysis we continue to believe that equities are a compelling risk / reward.We continue to believe that Western Digital can lead to a ~ $ 7 / sh. + Middle-cycle EPS recovery; However, we continue to believe that an important driver for this fundamental upside will not only be a recovery in the NAND Flash business, coupled with WD’s ability to see improved performance in enterprise SSDs, but also a sustained view that WD’s HDD gross margin may return to a sustainable level of 30% +, “says Rakers. For this, Rakers WDC is considering a buy with a price target of $ 65. If the target is reached, investors could pocket a profit of 29% in the coming months. Where is the rest of the street to this computer store? It looks mostly clumsy, as TipRanks analytics demonstrates WDC as a buy. Of the 11 analysts followed over the past 3 months, 7 are positive, while 4 remain off the sidelines. With a return potential of 9%, the consensus target price of the stock stands at $ 54.44. (See WDC stock analysis on TipRanks) To find great ideas for technical stocks trading at attractive valuations, visit TipRanks’ best stocks to buy, a newly launched tool that unites all TipRanks stocks. only those of the analysts who appear here. The content is for informational purposes only. It is very important to do your own analysis before investing.