The 3 Most Undervalued Semiconductor Stocks to Buy in July 2024 – InvestorPlace
Continuing to surge, this trio is driven by robust AI and automotive tech growth
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Undervalued semiconductor stocks are excellent additions to any portfolio because chip sales are expected to rise 13.1% in 2024 after falling about 8% in 2023. Global semiconductor sales climbed 15.8% to $46.4 billion in April, rising monthly for the first time this year. This serves as an encouraging indication for cheap semiconductor stocks.
Among the primary forces driving the market are the great need for artificial intelligence (AI) chips, increasing smartphone sales and slowing down IC design inventory loss. Thanks to the secular expansion in driverless automobiles, the automotive chip industry will also see great expansion.
In addition, businesses are focused on moving AI software from data centers to PCs and using innovative packaging methods. And with AI phones, PCs and wearable gadgets, semiconductor demand is set for long-term increase.
Under current conditions, it’s a perfect opportunity to start buying cheap semiconductor stocks, so Nvidia (NASDAQ:NVDA) won’t come up in our conversation, as it’s up over 172% this year. Instead, we’ll focus on three strong buy, underpriced semiconductor companies with double-digit upside.
Micron Technology (NASDAQ:MU) shares are up 59% this year. But the target price of $168.88 suggests a further 29% upside.
Besides its upside potential, Micron Technology has been profitable for eight of the last 10 years, outperforming more than 58% of the 920 semiconductor businesses. Micron Technology’s Q3 fiscal year 2024 sales grew to $6.81 billion from $5.82 billion and $3.75 billion. Non-GAAP quarterly net income was $702 million, or 62 cents per diluted share, exceeding expectations by 16%.
Solid execution and AI demand boosted Micron Technology’s sequential sales 17%. The company claimed record data center SSD sales and HBM market share. Quarterly operational cash flow rose to $2.48 billion from $1.22 billion. MU forecasts first-quarter FY 2025 revenues of $6.60–$6.80 billion and diluted EPS of 48 cents to 56 cents, powered by AI.
MU’s new products include desktop computer memory based on GDDR7. Suitable for AI and games with many dynamic features, it can manage over 1.5 TB/s and is 60% faster than GDDR6. Also, MU wants to have 32 Gbit DDR5 and GDDR7 memory on hand by 2024, benefiting the gaming and data center sectors especially.
Microchip Technology (NASDAQ:MCHP) stock is down around 2% in the last month. But considering its microcontroller and analog solutions, MCHP can mount a comeback since upside is over 10%.
The unfavorable mood stems from MCHP’s dismal Q4 of FY 2024 net sales of $1.33 billion, representing a 24.9% drop from the previous quarter and 40.6% from last year. In the same quarter last year, MCHP made $604 million, or $1.09 per share. Yet this year, it made $154.7 million, or 28 cents per split share.
Despite issues, Microchip Technology expects the September 2024 quarter to signal a comeback, with sales to rise sequentially as demand levels out. MCHP estimates Q1 of FY 2025 net sales of $1.22 billion to $1.26 billion and profit per share of 48 cents to 56 cents.
Microchip has outperformed 99% of its semiconductor rivals in profitability for 10 years, so the quarterly sales dip is likely a transitory hiccup. MCHP’s robust capital returns strategy will further impress investors seeking undervalued semiconductor stocks. It paid out $1.89 billion in dividends and share buybacks in FY 2024, up 15.4%. Its 1.9% yield beats the tech sector’s 1.025%.
On the product side, Microchip also recently launched 12 new wireless products to simplify Bluetooth for makers of all levels. Modules, system-on-chip products and plug-and-play options improve MCHP’s wireless solutions.
Marvell Technology (NASDAQ:MRVL) wraps up our exploration of undervalued semiconductor stocks. It is basking in the glow of Nvidia and other AI stocks, up 26.9% in 2024.
Some investors may believe MRVL is too hot right now. But experts are expecting a 23% upside for this gem among undervalued semiconductor stocks.
There is sound reason for the enthusiasm. The company had a strong fourth quarter for the FY 2024, with sales increasing 1% to $1.427 billion over the prior year and the company’s non-GAAP earnings per share growing 12% to 46 cents. The data center division achieved a record year with revenues of $765 million, up 54% year-over-year (YOY) and 38% quarter-over-quarter (QOQ). MRVL’s AI sales surged significantly in FY 2024, accounting for over 10% of sales, up from 3% in FY 2023.
On the product side, Marvell Technology introduced numerous new offerings at OFC 2024, most importantly launching the 3D Silicon Photonics engine for AI groups and other advanced uses.
Also, Marvell Technology is collaborating extensively with Wind River, Fujitsu (OTCMKTS:FJTSF) and Dell Technologies (NYSE:DELL). They will provide NTT DOCOMO Open RAN solutions. So, its semiconductor expertise will assist in shaping their 5G network architecture.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
Artificial Intelligence, Semiconductor, Technology
Dividend Stocks, Undervalued Stocks
Article printed from InvestorPlace Media, https://investorplace.com/2024/07/the-3-most-undervalued-semiconductor-stocks-to-buy-in-july-2024/.
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