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Intel And Other Top Semiconductor Stock Picks From J.P. Morgan

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Intel And Other Top Semiconductor Stock Picks From J.P. Morgan

Among the semiconductor stocks that analysts at J.P. Morgan expect to flourish in the coming year are Altera (NASDAQ: ALTR), Intel (NASDAQ: INTC), Texas Instruments (NASDAQ: TXN) and Xilinx (NASDAQ: XLNX).

In a recent research report, J.P. Morgan was impressed by the strong start to the year that the industry has had. The analysts were particularly positive on well-managed companies that had leverage, as well as upside potential, based on consensus price targets. They predict year-over-year revenue growth of eight percent for the industry this year as business conditions improve.

These top semiconductor picks also pay solid dividends. Note that Analog Devices was also featured in the J.P. Morgan report.

See also: How One Investor Profited From LeapFrog And Nintendo Before Wall Street

Altera

Altera said at the Mobile World Congress that it expects to benefit from six to seven years of LTE build-out in China. The company sports a market capitalization of more than $11 billion, with a dividend yield of about 1.7 percent. Its price-to-earnings (P/E) ratio is less than the industry average.

Seven of the 29 analysts surveyed by Thomson/First Call rate the stock at Strong Buy, and another eight recommend buying shares. The mean price target, or where analysts expect the share price to go, is more than six percent higher than the current share price. J.P. Morgan also sees about six percent upside potential.

Shares are up more than 13 percent year to date but still about four percent shy of the 52-week high from back in September. The share price is above the 200-day moving average. Over the past six months, however, the stock has underperformed competitor Xilinx and the broader markets.

Intel

Intel is still trying to play catch up in the non-PC markets, mainly tablets, but is making progress, including new processors unveiled Monday. Its market cap is more than $121 billion. The dividend yield is about 3.6 percent. The P/E ratio is less than the industry average and the return on equity is more than 17 percent.

For at least three months, the consensus recommendation of analysts surveyed has been to hold shares. They see little room for shares to run, as their mean price target is only about three percent higher than the current share price. But the J.P. Morgan team sees more than 18 percent upside potential.

The share price is about four percent lower than at the beginning of the year, and still up more than 12 percent from six months ago. The stock has not only underperformed the S&P 500 and the Nasdaq over the past six months, but competitors AMD and Texas Instruments as well.

Texas Instruments

This Dallas-based company said in its fourth-quarter report that it would cut 1,100 jobs worldwide. The market cap is more than $48 billion and the dividend yield is about 2.7 percent. The return on equity is more than 19 percent and the operating margin is greater than the industry average.

For the past three months, the consensus recommendation has been to hold shares of Texas Instruments. The current share price has overrun the analysts' mean price target, suggesting that they see no upside. However, the J.P. Morgan price target is almost 11 percent higher than the share price.

Shares have risen more than four percent since the beginning of the year, and the share price is above the 50-day moving average. Over the past six months, the stock outperformed both the S&P 500 and peer Qualcomm, but in that time it has underperformed the Nasdaq.

Xilinx

This dividend was raised in February, but the stock has seen considerable insider selling since the beginning of the year. Xilinx has a market cap of almost $14 billion. Its dividend yield is near 2.2 percent. The return on equity is more than 19 percent, and the operating margin is better than the industry average.

Of the 27 analysts polled, 16 recommend buying the shares, and none recommend selling. However, the current share price is higher than their mean price target. J.P. Morgan's target is even less than the consensus estimate. So, no upside potential is indicated at this time.

The share price has seen a gain of more than 13 percent year to date and shares are trading near a multiyear high. The stock has outperformed Altera and the S&P 500 over the past six months, but it has underperformed the Nasdaq.

See also: Companies That Blame The Weather For Earnings Misses

At the time of this writing, the author had no position in the mentioned equities.

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