Undervalued semiconductor stockshave declined sharply in 2022, pushing many stocks to 52-week lows. Supply-chainissueshave yet to be ironed out and the 40-yearhigh inflation has only added to suppliers’ woes.
Despite these challenges, thedemand for semiconductors remains strong worldwide. Recent researchhighlightsthat the global semiconductor “market is projected to grow from $483.00 billion in 2022 to $893.10 billion by 2029, at a CAGR of 9.2% in forecast period.”
Presently, however, investoroptimism for semiconductor stocks is still subdued. Accordingly, thePHLX Semiconductor Sectorindexhas fallenaround 24% year-to-date (YTD). In comparison, theS&P 500index hasonlydropped14%.
Despite recent challenges, the semiconductorsectoris poised to gain significant ground in the future. Anincreasingnumber of industries, such as robotics, artificial intelligence (AI),electric vehicles (EVs)and household goodshave startedutilizingsemiconductors in new and exciting ways.
With that information, here are five undervalued semiconductor stocks to buy in June:
| Ticker | Company | Price |
| MRVL | Marvell Technology, Inc. | $53.96 |
| MU | Micron Technology, Inc. | $67.27 |
| NVDA | Nvidia Corporation | $171.32 |
| TSM | Taiwan Semiconductor Manufacturing Company Limited | $88.71 |
| SMH | VanEck Semiconductor ETF | $225.01 |
Undervalued Semiconductor Stocks: Marvell Technology (MRVL)
- 52-week range: $50.41 – $93.85
Marvell Technology(NASDAQ:MRVL) designs and manufactures semiconductorsforcomputing, networking and storage, as well as a range of customized solutions.
In late May, Marvell reportedfirst quarter (Q1) fiscal-year 2023 (FY23)financials. Net revenue was $1.4 billion, representing a 74% increase year-over-year (YOY). Adjustedearnings per share (EPS)was 52 cents, up from 29 cents the year before. Cash flow from operations was $194.8 million.
Recently, Marvellintroducedits third-generation Marvell Brightlane Ethernet switchfor vehicles. Management highlights it is the most advanced secure managed switch in the industry. As a result, it will support various applications to improve vehicle performance and safety. Volume production is slated to begin later this year.
So far in 2022, MRVL stockhas dropped 34%, buthas still returned 16% over the past year. Shares are trading at 24.21 times forward earnings and 9.82 times sales.Meanwhile, the12-month median forecast stands at$85.
Micron Technology (MU)
- 52-week range: $63.21 – $98.45
Micron Technology(NASDAQ:MU) is highly regarded for its computer memory and data storage devices. The chip group specializes in dynamic random-access memory, flash memory, and USB flash drivesunder itsMicron, Crucial, and Ballistixconsumer brands.
At the end of March, Micron releasedQ2 FY22earnings. Revenue came in at $7.79 billion, compared to $6.24 billion theprevious year. Adjusted earnings per share (EPS) was $2.14, up from 98 centsa year ago. Adjusted free cash flow (FCF) was $1.03 billion.
Recently, the companyannouncedthe release of two newNVMe solid-state drives: the Crucial P3 Plus Gen 4 and the Crucial P3 Gen 3. These new drives incorporate the latestadvancements instorage technology, providing faster read/write speeds and up to four terabytes of storage.
MU stockhas lost 33.8% YTD. Forward price-to-earnings (P/E) and price-to-sales (P/S) numbers are 6.06x and 2.59x, respectively.Meanwhile, the12-month median forecast stands at$110.
Undervalued Semiconductor Stocks: Nvidia (NVDA)
- 52-week range: $155.67 – $346.47
Chip heavyweightNvidia(NASDAQ:NVDA) designs and produces graphics processing units, application processing interfaces, andsystem-on-a-chipunits for a variety of uses. It has also become the global leader in AI, cloud computing, mobile devices, and gaming.
In late May, NvidiaannouncedQ1 FY23metrics. Revenue for the quarter was a record-breaking $8.29 billion, up 46% from a year ago. Adjusted EPS was $1.36, up 49% from 91 cents the year before. FCF was $1.35 billion.
Nvidiarecently announced two major product releases: theGrace CPU Superchipand theHopper data center architecture,both of whichare named afterGrace Hopper, a computer pioneer. Leading computer companies, such asAtos(OTCMKTS:AEXAY),Dell(NYSE:DELL),Hewlett Packard Enterprise(NYSE:HPE),Lenovo(OTCMKTS:LNVGF), andSupermicro(NASDAQ:SMCI), have alreadyannouncedtheir intention to build data serversusingthese technologies.
So far in 2022, NVDA stockhas declined 37.9%. Shares are trading at 29.59 times forward earnings and 15.72 times sales.Finally, the12-month median forecast stands at$250.
Taiwan Superconductor Manufacturing (TSM)
- 52-week range: $85.39 – $145
Taiwan Superconductor Manufacturing(NYSE:TSM), usually abbreviated as TSMC, has been the world’s largest dedicated semiconductor foundry since its inception in 1987. It manufactures more than 12,000different products to serve hundreds of customers.
In mid-April, TSMCissuedQ1earnings. Revenue was $17.57 billion, a 36% YOY increase. Diluted EPS was $1.40 perAmerican depositary receiptunit. The net profit margin stood at 41.3%.
Recently,the companyannouncedthat the Japanese automotive component manufacturerDenso (OTCMKTS:DNZOY)wouldpurchase a minority stake intheTSMC subsidiaryJapan Advanced Semiconductor Manufacturing(JASM).Theconstruction of JASM’s new semiconductor fabrication facility is slated to begin this year, with production starting in 2024.
TSM stockhas dropped 35.7% YTD,having traded to its 52-week low on May 12. Forward P/E and P/S numbers are 16.31 and 8.17, respectively. The dividend yield is 2.11%. Lastly, the12-month median forecast stands at$157.89.
Undervalued Semiconductor Stocks: VanEck Semiconductor ETF (SMH)
- 52-week range: $215.23 – $318.82
- Expense ratio: 0.35% per year
We conclude our discussion with an exchange-traded fund (ETF)VanEck Semiconductor ETF(NASDAQ:SMH), which gives access to a range of semiconductor firms. The fund began trading in December 2011.
SMH, which tracks the returns of theMVIS US Listed Semiconductor 25 Index, currently has 25 holdings. The top 10 stocks comprise close to 60% net assets of $7.9 billion, making it a concentrated fund.
Among the leading names on the roster are Taiwan Semiconductor Manufacturing, Nvidia,TexasInstruments(NASDAQ:TXN),Analog Devices(NASDAQ:ADI),Advanced Micro Devices(NASDAQ:AMD), andBroadcom(NASDAQ:AVGO).
The fund declined 18.6% in 2022 and saw a 52-week low in May. Trailing P/E and price-to-book ratios stand at 32.53x and 10.14x. Despite this year’s decline in price, I remain bullish on chip shares and would consider investing in an ETF, like SMH, that focuses on the semiconductor industry.
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