After a particularly challenging year for semiconductor stocks, Marvell Technology and three other chip companies look like buys to analysts at Rosenblatt.
Stocks in the sector fell hard last year as demand for chips weakened but supplies remained high. The iShares Semiconductor (ticker: SOXX) exchange-traded fund, which tracks the performance of an index composed of top semiconductor stocks, ended 2022 down roughly 35%.
But analysts Hans Mosesmanna, Kevin Cassidy, and others listed 15 stocks that they said will help investors generate outperformance in their portfolios. Nvidia and Micron Technology, down about 50% and 46%, respectively, and Advanced Micro Devices and Marvell Technology , off 55% and 59%, were their top semiconductor picks. The analysts have Buy ratings on all four stocks, saying they believe in their long-term prospects and see room for their beaten-down valuations to rise.
“The semiconductor industry, which [the stocks] play in, is highly cyclical,” the note said. “Any global economic slowdown/macroeconomic uncertainty can derail the semiconductor industry as a whole.”
Marvell stock is currently trading at 17.9 times the per-share earnings expected for the next 12 months, but the analysts said that could rise to the mid-30s given that the company has the potential to grow at double-digit rates for years to come, partly because of its custom design offerings.
The analysts are also optimistic Nvidia will benefit from growth in the autonomous driving sector. The company is “a best-in-class AI play,” they said.
For AMD, the analysts see the company rapidly gaining share in the market for central processing units and graphics processing units. The “gain story is sustainable for the next 2-3 years,” they said.
Lastly, Micron is a pick on industry cyclicality. Cuts to capital spending last year across the industry will lead to a ripe second-half 2023 memory market for investors, they said. “Buy Micron before the above becomes obvious,” they wrote. The analysts have a $200 stock-price target for AMD and a $320 target for Nvidia. For Marvell, their target is $125, while the call on Micron is $100.