Semiconductors, also referred to as semis or chips, are essential components in the modern electrical devices we use every day. Anything that is computerized, such as smartphones, laptops, televisions, washing machines, air conditioners, cars, airplanes, and…
medical devices, are dependent on semiconductors.
The industry has grown rapidly and analysts expect that this momentum will continue. According to Fortune Business Insights, the industry generated more than $420 billion in 2020 and is expected to reach more than $800 billion in 2028.
The semiconductor industry, represented by the iShares Semiconductor ETF (SOXX), has jumped more than 20% this year. However, the ongoing chip shortage has had some far reaching ramifications and has caused many smartphone manufacturers to cut their production outlook.
Qualcomm is a large semiconductor company that focuses on building products for the wireless industry. The company is best known for its Snapdragon chips that power most smartphones. The firm operates in three segments: QCT, QTL, and QSI.
Qualcomm CDMA Technologies (QCT), which manufactures products like Snapdragon, accounts for about 70% of total revenue. Qualcomm Technology Licensing (QTL), on the other hand, provides intellectual property to companies that use its technology. Finally, Qualcomm Strategic Initiatives (QSI) is the venture arm of the company that invests in companies in industries like artificial intelligence and machine learning.
Qualcomm’s stock price has underperformed significantly this year. After soaring to $165 in February, it has crashed by more than 20%, entering into bear territory.
Still, there are a few reasons why Qualcomm is a good investment. First, while Qualcomm faces significant competition from Mediatek, it still has a strong competitive advantage. For one, it has a strong competitive advantage in industries like 5G and IoT. This has seen its revenue soar from $22 billion in 2017 to more than $32 billion in the trailing 12 months.
Moreover, the company offers strong shareholder returns. It offers a 2% dividend yield and the management is taking actions to remedy the weak share price. For example, they recently announced a $10 billion share buyback program. This program will top about $0.9 billion in the previous program.
In addition, analysts are generally positive about the stock price. Canaccord Genuity expect that the shares will rise to $225 while those at Cowen see it rising to $180. The average estimate on Wall Street for the stock is $176.54, which is much higher than the current price.
Finally, the company’s recent acquisition of Veoneer in a $4.5 billion deal could lead to strong performance as the autonomous mobility industry grows.
Micron is a semiconductor company that provides memory and storage solutions that provide the foundation of some of the fast-growing industries like artificial intelligence (AI), 5G, and data centers. Its products include DRAM, NAND, solid-state storage solutions, and graphics and high memory products.
The Micron stock price has lagged the market this year. It has dropped by more than 30% from its year-to-date high. This price action is mostly because of a…
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