Top Analysts Say Buy Analog Devices & Intel
Intel Foundry Services will manufacture several chips for MediaTek for a range of smart devices, the two companies announced on Monday.
Fabien Bimmer | Reuters
Markets are expected to remain volatile for the rest of the year or at least until inflation shows signs of stabilizing without compromising economic growth.
Indeed, stocks sold off sharply on Friday after Federal Reserve Chairman Jerome Powell delivered a speech in Jackson Hole, Wyoming. He continued to take a hard line against inflation, forcing investors to consider the possibility of higher rates for a longer period.
During an upheaval like this, it is essential that investors make informed decisions to ensure minimal damage to the portfolio during a potential downturn.
Here are five stocks with attractive long-term prospects, highlighted by top Wall Street professionals, according to TipRanks, a platform that ranks analysts based on their performance.
Product delays and a plateau in productivity have prevented chipmaker Intel (INTC) under pressure in recent years. However, the lull was broken on August 23 amid the announcement of a key semiconductor investment program between Intel and global infrastructure company Brookfield. This deal will help Intel secure and maintain its financial position and ability to generate dividends.
The partnership, which involves a joint investment of $30 billion, will accelerate the development of two new wafer manufacturing production sites in Chandler, Arizona. The announcement led Needham analyst Quinn Bolton to assess the implications of the partnership. (See Intel stock investor sentiment on TipRanks)
“The partnership enables a new source of capital that costs approximately 6.5% (our estimate) and protects Intel’s cash/debt position for future investments and maintaining the dividend,” Bolton said.
The analyst estimates that the program can save Intel $15 billion in capital expenditures compared to the traditional model. This, in turn, will increase the company’s free cash flow.
Bolton, which is ranked No. 3 in TipRanks’ database of around 8,000 Wall Street analysts, reiterated a buy rating on Intel, with a price target of $40. The analyst passed his ratings 69% of the time, each offering an average return of 43%.
Applied materials (AMAT) provides wafer fabrication equipment for the foundry/logic (F/L) and memory end markets. As with most semiconductor companies, supply chain issues and high procurement costs are weighing on the company’s profitability.
However, Bolton pointed out that the steps taken by the company to take pricing action to balance costs are promising. Additionally, solid foundry/logic market orders continue to be strong and help the company offset weaker demand in the memory and ICAPS (IoT, Communications, Automotive, Power and Sensors) markets. ). (See the date and history of applied material dividends on TipRanks)
Bolton, who expects decent growth in the wafer fabrication equipment industry this year, is confident that Applied Materials will be able to maintain its market share, given its leading position in this field.
Bolton reinforced a buy rating on the stock but lowered the price target to $125 from $130 after factoring in near-term challenges.
Premium coffee and media company Black Rifle Coffee Company, or BRC Inc. (DCFC) has been able to hedge against the broader market headwinds that have rocked the year so far.
Recently, Tigress Financial Partners analyst Ivan Feinseth reiterated a buy rating on BRCC stock. Additionally, he raised the price target from $17 to $19 based on the belief that “there is significant upside in the stock.”
BRC recently made a radical change in its growth strategy and is focusing more on distributing its products to the mass market. Feinseth believes the new path can lead to increased sales growth and product recognition with lower capital investment. (View BRC stock chart, price history and charts on TipRanks)
“BRC’s strong brand equity and unique customer relationship uniquely positions it to compete in the huge US coffee market,” the analyst explained.
Feinseth holds the 186e position among more than 8,000 analysts followed on TipRanks. Additionally, his ratings were successful 62% of the time, each generating average returns of 12.7%.
Analog Devices (ADI) is another semiconductor stock that is attracting the attention of top Wall Street pros. The company recently announced upbeat quarterly results, supported by strong order trends driven by its exposure to the automotive and industrial sectors.
JPMorgan analyst Harlan Sur delved into the company’s developments and came away optimistic. The analyst was very positive about the diversified consumer business of Analog Devices, which he believes will continue to outperform the overall consumer end market, even in an uncertain environment. (See Analog Devices insider trading activity on TipRanks)
“ADI is exposed to long-lifecycle consumer applications (30% of the mix) and the fast-growing segment of the wearables market (e.g. wearables, hearing aids and high-end smartphones) with low consumer exposure Chinese (low single digit percentage of total Overall, even in the face of a potential downturn, the team has multiple cost levers to protect its earning power and free cash flow generation,” Sur said.
Based on his track record, Sur is ranked No. 228 among more than 8,000 analysts in the TipRanks database. Additionally, 61% of its ratings were profitable, each generating average returns of 17%.
Synopsys electronics and software company (SNPS) is another analyst Harlan Sur favorite. As customers increasingly leverage advanced computing to verify their designs as quickly as possible, Synopsys is seeing strong adoption of its offerings.
Additionally, the complexity of chip design is increasing with the emergence of new advanced technology applications. This should be beneficial for Synopsys, providing it with a secular growth opportunity. “Given the strength of the order/booking backlog and continued strong chip/systems design activity, we believe the company is on track to grow revenue in CY23 even in the face of a potential slowdown in macro/semiconductor industry,” Sur said. (See Synopsys hedge fund trading activity on TipRanks)
Additionally, Sur expects the core tools of the electronic design automation software segment to grow, providing a “very stable but fierce competitive environment with vendors.” This is because the majority of the electronic design automation market share is split among three vendors – Cadence Design (CDNS), Synopsys, and Siemens, effectively blocking the chances of entry for any other vendor.
So Sur is confident that Synopsys is in a compelling position to stay strong even in an uncertain macro environment. He reiterated a buy quote on the stock and raised the price target from $400 to $440.