After a sharp rise last year, the stock hit when the corona virus swept the world. As the global economy is about to enter a recession, concerns have increased that demand for chips will collapse.
While market participants are still struggling to understand the true extent of the damage caused by the rapidly spreading virus to companies and their operations, some chipmakers are willing to recover once the pandemic is contained.
Three names are at the top of that list:
1. Micron
Micron (NASDAQ 🙂 specializes in DRAM, or dynamic random access memory, the type of memory chip that is widely used in PCs and servers.
Shares of the Boise, Idaho-based chipmaker, which ended at $ 42.06 on Tuesday, have risen 38% since they bottomed $ 52.13 in the past 48 weeks on March 18.
Investors have become increasingly optimistic about the company as data centers will have to buy more chips to meet the growing bandwidth requirements for remote working, gaming and e-commerce during the pandemic.
Market participants also expect Micron to sell more chips to notebook manufacturers as more employees work from home and students enroll in virtual online classes.
On March 25, "Micron delivered revenue at the top of the guidance range, despite the unfolding COVID-19 pandemic," said Micron President and CEO Sanjay Mehrotra. The chipmaker announced a 45 cent earnings per share on a revenue of $ 4.80 billion, beating earnings per share of 37 cents on a revenue of $ 4.69 billion.
Looking ahead to the fiscal third quarter, Micron EPS led in a range of 40 cents to 70 cents and revenues in a range of $ 4.6 billion to $ 5.2 billion. Analysts expect earnings per share of 54 cents for the coming quarter and sales of $ 4.91 billion.
"We will emerge from this challenging time, well positioned to capture robust long-term demand opportunities for memory and storage," said Mehrotra.
2. NVIDIA
NVIDIA (NASDAQ 🙂 is widely regarded as one of the world leaders in powerful graphics processing units or GPUs, chips used in mobile phones, PCs, notebooks, game consoles and data centers. The semiconductor giant for income and EPS for the past four quarters.
Shares of the Santa Clara, California-based company have risen by as much as 45% since dropping to their lowest levels of the year on March 18. The stock reached $ 263.60 yesterday, reaching a market capitalization of $ 161.3 billion.
In addition to the expected increase in demand for chips used in data centers, NVIDIA is likely to see a boost in GPUs used in medical research. The Parabricks GPU accelerated genome analysis toolkit allows scientists to fight the COVID-19 pandemic to work faster.
Needham analyst Rajvindra Gill explains:
"GPUs can accelerate the analysis of whole genomes, which consist of 3 billion base pairs in human chromosomes, from days to less than an hour."
"We expect an increase in demand for NVIDIA's GPUs in the medical field, particularly in DNA sequencing and drug development.
Gill has upgraded NVIDIA shares to be released from hold on March 24, citing the technology company's ability to provide critical processing power to researchers seeking solutions for COVID-19.
3. Xilinix
Shares of programmable chipmaker Xilinx (NASDAQ :), which develops various types of integrated circuits, have risen nearly 17% since hitting March 12 by 52 weeks reached from $ 67.68. The stock closed at $ 77.94 last night, giving it a market capitalization of $ 19.39 billion.
The San Jose, California-based company is likely to benefit from healthy data center chip sales to meet demand for cloud services. The upcoming deployment of 5G technology – the next-generation wireless revolution – is likely to drive sales growth further.
Goldman Sachs analyst Toshiya Hari upgraded the shares of Xilinx to buy from neutral on March 24, citing positive business trends as the Wall Street firm recalibrated its semiconductor sector coverage.
Citi analyst Christopher Danely also sounded optimistic, saying in a March 24 research paper that Xilinx is the best "place to hide" among semiconductors amid current uncertainties about the corona virus. He noted that in earlier downturns, "stocks with high, sustainable gross margins like XLNX outperformed"
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Xilinix on April 22. Consensus calls for a profit of 67 cents per share for the fiscal fourth quarter, while sales are expected to total $ 754.6 million.
