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3 Red-Hot Semiconductor Stocks to Add to Your Watchlist: Rambus, GlobalFoundries, and Kulicke & Soffa

The escalating war between Ukraine and Russia has exacerbated ongoing global supply chain issues and price increases for semiconductor chips. The industry is nonetheless expected to thrive, however, due to rising investments to ramp up production and heightened demand for semiconductor chips in electric vehicles (EVs) and consumer electronics industries. Therefore, we think it could be wise to add fundamentally sound semiconductor stocks GLOBAL (GFS), Kulicke (KLIC), and Rambus (RMBS) to one’s watchlist. These stocks have surged in price over the past month and could rally further based on their solid growth attributes. Read on.

The rising adoption of the Internet of Things (IoT), artificial intelligence (AI), 5G network, and cloud computing to make businesses more automated have been driving the semiconductor industry's growth. In addition, the CHIPS Act, which is awaiting passage in Congress, would allocate $52 billion for strengthening domestic semiconductor manufacturing and research, which could  bode well for the industry.

The escalating war between Ukraine and Russia have taken a significant toll on the semiconductor industry by deepening the supply shortage. However, surging demand from the automotive and electronics sectors worldwide should help the industry grow. According to the Semiconductor Industry Association (SIA), global semiconductor industry sales in 2021 reached a record $555.9 billion, up 26.2% year-on-year.

Fundamentally strong semiconductor stocks GLOBALFOUNDRIES Inc. (GFS), Kulicke and Soffa Industries, Inc. (KLIC), and Rambus Inc. (RMBS) have gained substantially over the past month, despite the broader market weakness. Therefore, we think they could be great additions to one’s watchlist.

Click here to checkout our Semiconductor Industry Report for 2022


GFS in Malta, N.Y. functions as a semiconductor foundry worldwide and manufactures integrated circuits that enable various electronic devices that are pervasive. The company manufactures microprocessors, mobile application processors, baseband processors, network processors, and other semiconductor devices.

This month, GFS announced its collaboration with industry leaders including Broadcom, Cisco Systems, Inc, Marvell, and NVIDIA, along with photonic leaders including Ayar Labs, Lightmatter, PsiQuantum, Ranovus, and Xanadu, to deliver innovative, unique, feature-rich solutions to resolve a few of the biggest challenges faced by data centers. GFS also announced a partnership with industry leader Cisco Systems, Inc., on a custom silicon photonics solution for DCN and DCI applications, including an interdependent Process Design Kit (PDK) in close collaboration with the manufacturing services team.

GFS' revenue increased 73.9% year-over-year to $1.85 billion in the fourth quarter, ending Dec. 31, 2021. Its operating profit came in at $87.00 million, compared to an operating loss of $491.00 million in the prior-year quarter. Its net income amounted to $43.00 million, compared to a $524.00 million net loss in the fourth quarter of 2021. Its EPS was $0.08, compared to a loss per share of $1.05 in the prior-year quarter.

Analysts expect GFS' revenue to increase 18.9% year-over-year to $7.83 billion in its fiscal 2022. The company's EPS is expected to grow 35.5% year-over-year to $2.55 in fiscal 2023. The stock has gained 18.2% in price year-to-date and 54.5% over the past month.

Kulicke and Soffa Industries, Inc. (KLIC)

Headquartered in Singapore, KLIC designs, manufactures, and sells capital equipment and tools used to assemble semiconductor devices. Capital Equipment and Aftermarket Products and Services (APS) are its two operational segments. The company also manufactures and sells advanced displays, die-transfer, flip-chip, and TCB advanced packaging products.

Last month, KLIC announced the expansion of its Thermal Compression Bonding (TCB) capabilities to accelerate innovation in semiconductor and Silicon Photonics integration. The company's broad assembly solutions are serving the current needs for Multi-Chip Module (MCM) assembly, System-in-Package (SiP), as well as the emerging market needs for Heterogeneous, or Chiplet, integration and also co-packaged optics.

In January, KLIC announced the launch of KNeXt, the new web-based industry 4.0 software solution at SEMICON Taiwan that connects K&S equipment and enables fleet management, factory automation, and productivity improvement. "Industry 4.0 adoption is a continuous journey with increasing automation needs as semiconductor assembly becomes more complex," said Meng Kwong Han, Kulicke & Soffa Vice President of Aftermarket Products & Services.

In its first fiscal quarter, ended Jan. 1, 2022, KLIC's net revenue increased 72.1% year-over-year to $460.89 million. Its non-GAAP income from operations grew 163.9% % from its year-ago value to $157.80 million, while its non-GAAP net income improved 158.5% year-over-year to $138.80 million. The company's non-GAAP EPS increased 154.7% from its year-ago value to $2.19.

The consensus EPS estimate of $1.46 for its second quarter, ending March 31, 2022, represents a 16% improvement year-over-year. Analysts expect KLIC's revenue to increase 11.8% year-over-year to $380.25 million in the second-quarter, ending March 31, 2022. Also, it has  an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters. The company's shares surged 23.6% over the past year and 17% over the past month.

Note that KLIC is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.

Rambus Inc. (RMBS)

RMBS in Sunnyvale, Calif., provides semiconductors internationally. The company offers DDR memory interface chips, including DDR5, DDR4, and DDR3 memory interface chips to module manufacturers and OEMs; silicon IP comprising interface and security IP solutions that move and protect data in advanced applications; and physical interface and digital controller IP.

In January, RMBS announced the availability of its PCI Express (PCIe) 6.0 Controller, which delivers data rates up to 64 Gigatransfers per second (GT/s) for high-performance applications. The PCIe specification is the interconnection of choice across many data-intensive markets, including data center, AI/ML, HPC, automotive, IoT, defense, and aerospace. The controller also provides state-of-the-art security with an Integrity and Data Encryption (IDE) engine that monitors and protects PCIe links against physical attacks.

During the fourth quarter ended December 31, 2021, RMBS' total revenue increased 48.2% year-over-year to $91.78 million. Its operating income came in at $8.97 million, compared to an $11.00 million operating loss in the prior-year quarter. Its net income amounted to $6.11 million, compared to a $12.06 million net loss in the prior-year quarter. The company's EPS amounted to $0.05, compared to a $0.11 loss per share in the fourth quarter of 2021.

RMBS' revenue is expected to be $127.90 million in the first quarter (ending March 2022), representing 21.8% year-over-year growth. The $0.39 consensus EPS estimate for its fiscal 2022 indicates a 146.4% improvement year-over-year. The stock has soared 52.7% in price over the past year and 16.8% over the past month.  

Click here to checkout our Semiconductor Industry Report for 2022        

GFS shares were trading at $71.82 per share on Monday afternoon, down $4.96 (-6.46%). Year-to-date, GFS has gained 10.54%, versus a -6.70% rise in the benchmark S&P 500 index during the same period.

About the Author: Spandan Khandelwal

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.


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