BARRON'S: 2 Chip Stocks to Buy After the Big Market Drop, According to an Analyst
By Tae Kim
March 9, 2020 2:34 pm ET
The recent market decline due to uncertainty over the coronavirus is providing attractive buying opportunities in the semiconductor sector, according to Wells Fargo Securities.
Chip stocks have tumbled, along with equity markets. The iShares PHLX Semiconductor ETF(ticker: SOXX), which tracks the performance of a widely followed semiconductor-sector index, has declined by about 14% over the past month, compared with the 16% drop for the S&P 500.
Wells Fargo analyst Gary Mobley on Monday reiterated his Overweight ratings for both Qorvo(QRVO) and Skyworks Solutions(SWKS). He noted both chip makers already modestly lowered their financial forecasts due to the coronavirus last week.
“Following a recent round of estimate cuts for QRVO & SWKS...we believe [next 12 months] estimates have been largely de-risked,” he wrote. “We suggest investors buy shares of QRVO & SWKS following the recent sell off.”
Qorvo shares were down 4.5% to $90.09, while Skyworks stock declined 6.7% to $89.27 on Monday afternoon. The chip companies make radio-frequency, or RF, semiconductors, which enable smartphones to communicate with wireless networks.
The analyst said the two companies are the “best-in-class” ways to play the growth in 5G smartphones as the amount of RF chip content is much higher in 5G phones than in the prior 4G models. He also thinks China may subsidize the cost of 5G handsets to boost demand and help its economy.
“We believe wider adoption of 5G...will drive [the] smartphone industry to transition to more global designs (which uses more expensive RF...solutions),” he wrote.
Wall Street analysts are mixed on Qorvo. About 54% have ratings of Buy or the equivalent on the stock, while 46% have Hold ratings, according to FactSet. Views about Skyworks are similar, with 55% at Buy and 42% at Hold. |
