Your stocks to watch for the week ahead are chip plays On Semiconductor (ON), Monolithic Power Systems (MPWR), Axcelis Technologies (ACLS), Analog Devices (ADI) and GlobalFoundries (GFS).
These semiconductor stocks are getting a boost after President Joe Biden recently signed a law to aid the U.S. chip industry.
Semiconductors are considered critical components in products ranging from computers, consumer electronics, automobiles and health care equipment to weapons systems. However, the U.S. currently produces about 10% of the world’s supply of semiconductors, while East Asia accounts for 75% of global production.
Another reason for investors to keep an eye on semiconductor stocks is that the industry is currently seeing record revenue with projections that by 2023, the global market will grow to $104.3 billion.
ON stock is a relatively new S&P 500 component, joining the benchmark index in late June. Monolithic Power, On Semiconductor and Axcelis are all on the IBD 50. MPWR stock is on IBD Long-Term Leaders. GlobalFoundries was Friday’s IBD Stock Of The Day.
On Semiconductor Stock
On Semiconductor, better known as Onsemi, makes power control and sensing chips for automotive, industrial and other applications. The company is benefiting from trends bolstering electric vehicles, energy infrastructure upgrades and factory automation.
ON stock rose 1.9% to 72.53 last week.
The Onsemi stock has broken out from a 69.36 handle buy point in a consolidation going back to the start of the year. The 5% buy zone runs to 72.83. Investors also could use 71.35, 10 cents above the old high, as an entry.
Keep in mind that ON stock has rallied for seven straight weeks, and could be do for pullback that shows up on a weekly chart.
On Aug. 1, Phoenix-based Onsemi beat Wall Street’s targets for the second quarter and guided higher for the current period. ON stock, which had raced higher from early July, initially fell as investors weighed a possible dip in gross profit margin in the current quarter.
On Semi stock initially cleared the handle on Aug. 12, but fell back below that entry a few days later. But shares then surged higher on Thursday to a record high.
Thursday’s catalyst was rival Wolfspeed (WOLF), which reported strong quarterly results and guidance the night before. WOLF focuses on silicon-carbide chips for electric vehicles and 5G wireless.
Some analysts believe Onsemi is on track to become a leader in silicon carbide chips. Those next-generation chips will lead to oversize growth and increased profitability. Wall Street predicts Onsemi earnings will increase 50% in Q3 to $1.31 per share. Revenue is expected to grow 23% to $2.1 billion.
Onsemi stock ranks first in the Electric-Semiconductor Manufacturer industry group. ON stock has a Composite Rating of 98. It has an 96 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share price movement with a 1 to 99 score. The rating shows how a stock’s performance over the last 52 weeks holds up against all the other stocks in IBD’s database. The EPS rating is 92.
Semiconductor Stocks: Monolithic Power Systems Stock
Kirkland, Wash., based chipmaker is forming a cup-with-handle base and has been holding up well after it beat earnings estimates on Aug. 1. It has a 541.49 buy point, according to Leaderboard analysis.
MPWR stock fell just over 3% last week to 511.65, but didn’t undercut the prior week’s low and is above the 21-day line. It’s more than 10% above its 200-day and 50-day line. A market pullback could help Monolithic Power stock form a more-meaningful handle.
Investors should be cautious however, as the base could be fourth stage, according to MarketSmith analysis. Late stage bases greatly increase risk. As with Onsemi, a market pullback could help MPWR’s handle extend.
Monolithic Power Systems produces technologies to improve mobile device battery life, data centers and other products. Second-quarter profit grew 80% to $3.25 a share. Total sales increased 57% to $461 million. It was the third straight quarter of accelerating growth for both.
Analysts project third-quarter profits to balloon 69% to $3.49. Revenue is forecast to grow 50% to $491 million.
Monolithic Power is first in the Electric-Semiconductor Fabless industry group. MPWR stock has a best-possible 99 Composite Rating. It has a Relative Strength Rating 0f 89. Its EPS Rating is 99.
Semiconductor equipment maker Axcelis Technologies is eying continued growth as the auto industry looks to target electric vehicles. ACLS stock has formed a cup-with-handle base with a buy point of 79.93, according to MarketSmith charts.
The handle is deep enough at 16%, but has a lot of big swings. ACLS stock has found support at the 21-day line in recent weeks.
ACLS stock fell 3.45% to 74.22 last week, but closed high in the weekly range once again.
ACLS stock moved above its 200-day moving average on July 20 amid increased volume. The base appears to be in its first stage as the handle looks to extend.
The Massachusetts-based company makes ion implantation systems, which are critical for manufacturing integrated circuits. Ion implantation equipment creates charged regions within silicon wafers to enable transistor functionality.
On Aug. 3, Axcelis easily beat Wall Street’s targets for the second quarter and guided higher for Q3 and full year.
Semiconductor stock Axcelis sits second, behind Photronics (PLAB) in the Electric-Semiconductor Equipment industry group. ACLS stock is on the IBD 50 list of top-performing growth stocks. It has a Composite Rating of 98. It has a 96 Relative Strength and EPS Rating.
Analog Devices Stock
This chip giant narrowly beat third-quarter estimates Wednesday morning. ADI stock is forming a long cup with a 192.05 buy point. Analog Devices stock needs another day for handle to form with a 180.11 buy point. But that handle is already there on a weekly chart, with ADI stock down 6.3% to 168.
This semiconductor stock has been trading above both its 50- and 200-day moving averages since July 27, but on Friday it moved closer to its 200-day line.
Analog Devices’ fall Wednesday came alongside a broader downturn for chip stocks, which tumbled a collective 2.7%. The company earned $2.52 per share, surging 47% year-over-year. Sales shot up 77% to $3.1 billion.
For the current quarter, the company guided to $3.15 billion in sales, plus or minus $100 million, and adjusted earnings of $2.57 per share, at the midpoint.
Analog Devices stock is third in the Electric-Semiconductor Manufacturing industry group. It has a 93 Composite Rating. Its Relative Strength Rating is 74. It has a EPS Rating of 90.
The GlobalFoundries stock chart can be seen as a very deep double-bottom base. GFS stock now has a handle, giving it a slightly higher 66.06 buy point. However, the handle is short and relatively shallow given the huge moves for this 2021 tech IPO. Shares are well extended from the 50-day line.
Investors should likely wait for GlobalFoundries to forge a longer, deeper handle, perhaps one that can be its own shallow base within the larger consolidation.
The Malta, N.Y.-based contract chip manufacturer beat second quarter financial goals on Aug. 9, earning 58 cents a share on sales of $1.99 billion. GFS stock initially rose after the earnings report last week, but ended up dropping 6% in a down market day. However, it followed that up with gains in three straight sessions.
For the current quarter, GlobalFoundries forecast booming earnings well above views and revenue also above consensus.
As a U.S.-based foundry, GlobalFoundries may be a notable winner from the CHIPS Act. It may also win over business and investors worried about industry titan Taiwan Semiconductor (TSM) amid rising U.S.-China tensions over Taiwan.
GlobalFoundries ranks eighth in the Electric-Semiconductor Manufacturing industry group. The stock has a Composite Rating of 89. Its Relative Strength Rating is 92 and it has a 77 EPS Rating.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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