Wells Fargo: 3 pieces to buy when we enter 2021
Semiconductors are one of the essential industries of the modern world, enabling so much of what we trust or take for granted: internet access, high-speed computers with high-speed memory, even the thermostats that control our air conditioner – there is not much, technically speaking, that do not use semiconductor chips. With the end of 2020 in sight, it̵
7;s time for the annual ritual to evaluate the shares for the New Year. Wells Fargo analyst Aaron Rakers has turned his attention to the chip industry, marking several companies as likely winners next year. The analyst sees several factors that combine to increase demand for chips in 2021, including cloud demand, new game consoles and a market resolution the future of the PC segment. Overall, however, the Rakers expect memory chips and 5G-enabled chips to emerge as drivers for the industry next year. The analyst expects semiconductor companies, as a group, to see between 10% and 12% growth over the next 12 months, but this is an average across the industry. According to Raker, some chip companies will show significantly higher growth, in the order of 30% to 40% in the coming year. We can look at these companies, along with the latest TipRanks data, to find out what makes these specific chip manufacturers so compelling. Micron Technology (MU) Among the leading chip manufacturers, Micron has placed a position in the memory segment. The company has seen its market value expand to $ 78 billion this year, as shares have risen 32% so far this year. The wave comes from a product line that increases data storage, DRAM and flash storage. Looking back on 2020, Micron has seen revenue increase every quarter, from $ 4.8 billion in the first quarter to $ 5.4 billion in the second quarter to $ 6.1 billion in the third quarter. Earnings were 87 cents per share, up from 71 cents in the second quarter and 36 cents in the first quarter. The third quarter calendar was Micron’s 4QFY20, and the entire financial year showed a decline due to the COVID pandemic. Revenue was $ 21.44 billion, down 8.4% from a year earlier, and operating cash flow fell to $ 8.31 billion from $ 13.19 billion in FY19. During the last quarter, Micron’s 1QFY21, the company announced the launch of the world’s first 176-layer 3D NAND chip. The new chip promises higher density and faster performance in flash memory, and the architecture is described as a ‘radical breakthrough’. The team number is 40% higher than competing chips. Looking ahead, Micron has updated the F1Q21 guidance, predicting total revenue of $ 5.7 billion to $ 5.75 billion. This is an increase of 10% from the previous guide. Wells Fargo Aaron Rakers calls Micron his top semiconductor idea for 2021. He points to “a deeper positive view of memory, and especially the DRAM industry. DRAM accounts for about two-thirds of Micron’s revenue and over 80% of the company’s earnings.” notes Rakers’ Micron technology performance – 1Znm DRAM management; recently outlined 1αnm ramp into 2021, as well as Micron’s transition to 176-layer second-gen Replacement Gate 3D NAND to increase improved cost curve.We will also highlight Micron’s performance on graphics memory (f. eg GDDR6X), Multi-Chip Packages (MCPs) and High-Bandwidth Memory (eg HBME2) as positive. ”In line with these comments, the Rakers consider Micron sharing a purchase, along with a $ 100 price target. the number suggests room for 41% growth in 2021. (To see the Rakers’ track record, click here) Micron has 24 recent reviews on record, divided into 19 Buys, 4 Holds, and 1 Sell, giving the stock a strong buy. Analyst consensus.Shares are priced at $ 70.96, and the latest sty rkingen has pushed them almost to an average price target of $ 74.30. But as the Rakers’ outlook suggests, there may be more than just 4.5% upside available here. (See MU stock analysis on TipRanks) Advanced Micro Devices (AMD) With $ 6.5 billion in total sales last year, and a market value of $ 110.7 billion dollars, AMD is a giant company – but it does not even break the top five of the world’s largest chip manufacturers. AMD still has a solid position in the industry, and x86 processors provide fierce competition for market-leading Intel (INTC). AMD shares have shown solid growth this year, and are up 101% as 2020 draws to a close. Equity growth is riding due to steady earnings gains since the corona crisis peaked in the first quarter. AMD’s Q3 top line came in at $ 2.8 billion, up 55% from $ 1.8 billion recorded last year, beating the forecast by 10%. Earnings, by 37 cents per share, increased by 220% from the previous year. The company credited the growth to solid results in product lines for PC, games and data centers, and boasted that it was the fourth quarter in a row with> 25% annual revenue growth. Last month, AMD announced a new product for the scientific research market, the Instinct MI100 accelerator pedal. The new chip is considered the world’s fixed HPC GPU, and the first such x86 server to exceed 10 teraflops performance. Rakers, which covers AMD for Wells Fargo, wrote: “We remain positive on AMD’s competitive position for continued sustained gradual stock gains in PCs … We also believe AMD’s in-depth data center GPU strategy with new Instinct MI100 GPUs and the release of RoCM 4.0 The software platform may become increasingly visible as we move through 2021. AMD’s roadmap driving will continue to be a major focus – the 7nm + Ryzen 4000 series, new RDNA Radeon Instinct data center GPUs (MI100 / MI120), and the 3rd – gen 7nm + EPYC Milan processors … ”Raker’s position supports his Buy rating, and his price target of $ 120 implies a one year upside of 30% to the stock. The Moderate Buy analyst’s consensus view on AMD reflects some remaining Wall Street caution. The stock’s 20 recent reviews include 13 purchases, 6 caps and 1 sale. AMD shares sell for $ 91.64, and like Micron, their recent valuation has closed the gap with an average price target of $ 94.71. (See AMD stock analysis at TipRanks) Western Digital Corporation (WDC) Western Digital, a designer and manufacturer of memory systems, excludes Wells Fargo selections from this list. The company’s products include hard drives, solid state drives, data center platforms, built-in flash drives and portable storage including memory cards and USB memory sticks. WDC has had a tough year in 2020, with shares down 19% from today. Nevertheless, the stock has seen gains in November and December, on the heels of what was seen as a strong financial 1Q21 report. This earnings report showed $ 3.9 billion in revenue, which was down 3% compared to the previous year, but the EPS net loss, by 19 cents, was a huge improvement from the previous year from the 93 percent net loss last year. The improvement in earnings, which beat the forecast by 20%, was the key for investors, and the share is up 30% since the quarterly report. The company also generated a solid cash flow in the quarter, with cash from operations increasing 111% sequentially. Wells Fargo’s Rakers acknowledge WDC’s difficulties in 2020, but he still believes this is a stock worth the risk. “Western Digital has been our toughest constructive conversation in 2020, and while we think calling a bottom in NAND Flash (mid / 2H2021?) Is still difficult, and WD’s performance in the company’s SSDs will remain choppy, our SOTP analysis allows us continue to believe that stocks provide a compelling risk / reward. We continue to believe that Western Digital can run at a ~ $ 7 / sh. + Mid-cycle EPS history; However, we continue to believe that a key driver for this fundamental upside will not only be a recovery in the NAND Flash business, combined with WD’s ability to see improved performance in the company’s SSDs, but also a continued view that WD’s gross HDD margin can return to a sustainable level of 30% +, ”said Rakers. For this purpose, Rakers WDC is considering a purchase along with a price target of $ 65. Should the target be achieved, investors can receive gains of 29% over the next few months. It seems mostly bullish, as TipRanks analyzes demonstrate WDC as a buy. Of the 11 analysts tracked in the last 3 months, 7 are positive, while 4 remain on the sidelines. With a return potential of 9%, the stock’s consensus target price is $ 54.44. (See WDC stock analysis on TipRanks) To find great technical stock trading ideas for attractive valuations, visit TipRanks ‘Best Aks to Buy, a recently launched tool that unites all of TipRanks’ equity insights. exclusively those of the selected analysts. The content is intended for informational purposes only. It is very important to do your own analysis before making an investment.