The semiconductor industry is on the cusp of a remarkable turnaround this earnings season, with overall earnings projected to outshine the year-ago quarter. Weathering a spell of economic challenges and disruptions in the supply chain, semiconductor stocks are now primed for substantial growth, thanks to a steady uptick in sales.
Amidst a backdrop of pandemic-induced supply chain hurdles and the Federal Reserve’s stringent monetary policies curbing demand, the semiconductor market encountered significant strife. However, the easing inflation rates and a reviving demand scenario since the second quarter of 2023 have charted a positive trajectory for the industry.
Generative AI, a groundbreaking technology, has led to increased investments and applications across multiple sectors, bolstering semiconductor sales. Global semiconductor sales exhibited a 16.3% surge to $46.2 billion in February 2024, marking four consecutive months of year-over-year growth and signaling a robust recovery.
Identifying Winning Semiconductor Stocks
Finding semiconductor stocks poised to exceed earnings estimates amid numerous contenders may seem daunting. Nevertheless, a specific methodology simplifies the selection process significantly.
To narrow down the options effectively, focus on stocks that boast a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold). The Earnings ESP calculates the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, offering insight into potential earnings beats before announcements.
Research indicates that stocks meeting these criteria enjoy a substantial 70% chance of a positive earnings surprise.
Top 4 Semiconductor Stocks Meeting the Criteria
1. Advanced Micro Devices, Inc. (AMD): Scheduled to announce first-quarter 2024 results on Apr 30, AMD holds a Zacks Rank #2 with an Earnings ESP of +28.33%. The Zacks Consensus Estimate for AMD’s revenues stands at $5.42 million, with predictions of a 1.2% rise from the year-ago quarter.
2. Skyworks Solutions, Inc. (SWKS): Set to disclose second-quarter fiscal 2024 results on Apr 30, SWKS bears a Zacks Rank #3 with an Earnings ESP of +0.73%. The Zacks Consensus Estimate for SWKS earnings remains unchanged at $1.52 per share, reflecting a 24.8% year-over-year decline.
3. Applied Materials, Inc. (AMAT): Anticipated to unveil second-quarter fiscal 2024 results on May 16, AMAT carries a Zacks Rank #2 with an Earnings ESP of +0.31%. Forecasts predict earnings of $1.96 per share, marking a 2% decline from the year-ago quarter.
4. NVIDIA Corporation (NVDA): Slated to report first-quarter fiscal 2025 results on May 22, NVDA holds a Zacks Rank #2 with an Earnings ESP of +2.50%. The Zacks Consensus Estimate foresees earnings of $5.49 per share, signifying a substantial 403.7% year-over-year improvement.
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Disclaimer: The article is not an endorsement of any investment strategy or stock. Please conduct thorough research or consult with a financial advisor before investing.