4 Small-Cap Semiconductor Stocks To Buy For Q2 2021
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Pandemic-driven, remote lifestyles have increased consumer spending on technology products and services over the past year. The ballooning demand has precipitated a semiconductor shortage worldwide. In response, President Biden has apportioned $50 billion for the semiconductor industry in his proposed $2 trillion infrastructure spending package.
So, investors are scrambling now to invest in semiconductor stocks to capitalize on the anticipated semiconductor boom. This is evidenced by iShares PHLX Semiconductor ETF’s (SOXX) 35.6% gains over the past six months compared to SPDR S&P 500 Trust ETF’s (SPY) 19.7% returns over the same period.
With most companies in the sector working to increase their semiconductor production to meet the high demand, the global semiconductor market is expected to grow at a CAGR of 4% over the next four years to reach $90.80 billion by 2024. Small-cap companies are expected to grow at a faster rate than their large-cap brethren.
Thus, we expect small-cap semiconductor companies Camtek Ltd. (CAMT), SMART Global Holdings, Inc. (SGH), ChipMOS Technologies Inc. (IMOS), and DSP Group, Inc. (DSPG) to generate robust returns this quarter.
Camtek Ltd. (CAMT)
Based in Israel, CAMT manufactures metrology and inspection equipment for the semiconductor industry and provides software solutions. The company services the advanced packaging, memory, complementary metal oxide semiconductor (CMOS) image sensors, micro electromechanical sensor (MEMS), radio frequency (RF) and other segments in the mid-end of the semiconductor industry worldwide.
It provides solutions and yield-enhancement data that enables manufacturers to improve yield and drive down production costs. It also provides tailor-made solutions in line with customers’ requirements. CAMT has a market capitalization of $1.39 billion.
On March 31, CAMT received $20 million worth orders for inspection and metrology systems from several companies in the field of advanced packaging and compound semiconductors. It expects these systems to be installed during the second and third quarters of 2021. And in January, one of the world’s top Integrated Circuits (IC) manufacturers selected CAMT’s Eagle 2D plus 3D model, the most advanced inspection and metrology equipment, for its global fabrication sites. Following the selection, CAMT has received multiple additional orders.
CAMT is scheduled to announce its fiscal 2021 first quarter financial results on April 28. During the fourth quarter, ended Dec. 31, 2020, CAMT’s revenues increased 46.4% year-over-year to $48.6 million. Its non-GAAP gross profit was $23.40 million, which represented a 47.2% improvement year-over-year.
The company’s non-GAAP operating income was $9.2 million, up 70.4% from the prior-year period. Its $8.8 million of non-GAAP net income for the quarter represents a 63% improvement year-over-year. Its non-GAAP EPS also increased 50% year-over-year to $0.21.
Analysts expect CAMT’s EPS to improve 68.8% year-over-year for the current quarter, ending June 30, 2021, to $0.27. It has achieved and surpassed the Street’s EPS estimates in three of the trailing four quarters. And its $55 million consensus revenue estimate for the current quarter represents a 48.6% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at 15% per annum over the next five years.
CAMT has climbed 227.4% over the past year to close the most recent trading session at $32.12. Over the past nine months, the stock has gained 140.4%. CAMT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth, Momentum, Sentiment, and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see CAMT’s ratings for Value and Stability here. CAMT is ranked #20 of the 99 stocks in the B-rated Semiconductor & Wireless Chip industry.
SMART Global Holdings, Inc. (SGH)
With a market capitalization of $1.35 billion, SGH is a provider of specialty memory, storage, and hybrid solutions worldwide. The company operates through three segments—Specialty Memory Products, Brazil Products, and Specialty Computer and Storage Solutions (SCSS).
It delivers components, modules, and storage solutions to original equipment manufacturers, enterprise, government, and other customers in computing, networking, storage, mobile, communications, and industrial markets.
On April 7, 2021, Penguin Computing, a division of SGH, announced the availability of Penguin Computing Relion family of Linux-based servers with the latest 3rd Gen Intel Xeon Scalable processors.
In late March, SMART Modular Technologies, a subsidiary of SGH, introduced DuraMemory DIMMs and Mini-DIMM for hyperscale network switching in data center enterprise applications. And on March 1, SGH completed its acquisition of Cree, Inc.’s (CREE) Cree LED Products business unit to use CREE LED’s specialty lighting in computing and memory.
For its fiscal 2021 second quarter, ended Feb. 26, 2021, SGH’s total net sales were $304.01 million, which represented a 11.8% rise year-over-year. The company’s $59.25 million non-GAAP gross profit represented a more than 12% improvement from the prior-year period. Its non-GAAP income from operations came in at $27.16 million, up 57.4% year-over-year. Its non-GAAP net income was $21.93 million for the quarter, which represented a 71.9% rise from the prior-year period. And its non-GAAP EPS increased 67.3% year-over-year to $0.87.
Analysts expect SGH’s EPS to improve 55.7% year-over-year for the current quarter to $1.09. The stock had impressively surpassed consensus EPS estimates in each of the trailing four quarters. And its consensus revenue estimate of $439.35 million for the next quarter, ending Aug. 31, 2021, represents a 47.9% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at more than 33% per annum over the next five years.
SGH ended the most recent trading session at $56.53, surging 132.3% over the past year. During the past six months, the stock has plunged 120.7%. It’s no surprise that SGH has an overall B rating, which equates to Buy in our POWR Ratings system. SGH also has a B grade for Value and Growth. In addition to the POWR Ratings grades we’ve just highlighted, one can see SGH’s ratings for Quality, Momentum, Sentiment, and Stability here.
ChipMOS Technologies Inc. (IMOS)
IMOS is a Taiwan-based company that is engaged in integrated circuits (IC) packaging, and related assembly and testing businesses. The company’s products and services are applied in information products, personal computers, communication equipment, office automation, and consumer electronics.
It operates its businesses mainly within the domestic market and the rest of Asia and the U.S. IMOS serves semiconductor companies, integrated device manufacturers, and independent semiconductor foundries. It has a market capitalization value of $1.16 billion.
The company has reported $82.30 million of for the month of March, up 19.8% from February. Its revenue for the first quarter of 2021 came in at $227 million, which represents an increase of 2.5% sequentially.
For the fourth quarter, ended Dec. 31, 2020, IMOS’ revenue was $224.70 million, which represented an improvement of 13.3% year-over-year. The company’s net profit came in at $24.40 million, up 29.1% year-over-year. Its EPS was $0.67 for the quarter, which represented an improvement of 28.8% from the prior-year period. As of Dec. 31, 2020, IMOS had free cash flows of $55.5 million and cash and cash equivalents of $151.45 million.
For the current quarter, ending June 30, 2021, analysts expect IMOS’ revenue to be $236.07 million, representing a 28.2% rise from the prior-year period. IMOS has gained 69.7% over the past year and 60.2% over the past six months. It closed the most recent trading session at $32.08.
It’s no surprise that IMOS has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Value, and a B grade for Stability and Momentum. Click here to see the additional ratings for IMOS (Growth, Quality, and Sentiment). IMOS is ranked #10 in the same industry.
DSP Group, Inc. (DSPG)
Headquartered in San Jose, California, DSPG is a semiconductor company that provides wireless and audio chipset solutions for converged communications. The company operates through three segments: SmartVoice, SmartHome, and Unified Communications.
It markets and distributes its products through direct sales, marketing offices, and a network of global distributors to original equipment manufacturers and original design manufacturers. It has a market capitalization value of $344.49 million.
Last month, DSPG opened an audio innovation lab in Straubing that will focus on advancing the state-of-the-art in audio signal processing and artificial intelligence (AI) for acoustic engineering. And on Jan. 7, it launched DBM10, a low-power, cost-effective artificial intelligence (AI) and machine learning (ML) system on chip (SoC) that enables fast TTM for integration of voice and sensing algorithms.
DSPG’s revenue increased nearly 9% year-over-year to $31.89 million for the fourth quarter, ended Dec. 31, 2020. The company’s gross profit came in at $16.34 million, up 9.7% year-over-year. Its non-GAAP operating income was $2.90 million for the quarter, which represents an improvement of 314.3% year-over-year. Its non-GAAP net income was $2.89 million for the quarter, up 83.6% from the prior-year period. The company’s non-GAAP EPS increased 100% year-over-year to $0.12.
A consensus EPS estimate of $0.07 for the next quarter, ending Sept. 30, 2021, represents a 36% improvement year-over-year. DSPG surpassed consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $31.94 million for the next quarter represents a 22.7% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at 8% per annum over the next five years.
The stock has been trading 14.5% higher than its 52-week low of $12.42. DSPG closed the most recent trading session at $14.22. DSPG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock also has a B grade for Value and Sentiment. We have also graded DSPG for Growth, Stability, Momentum, and Quality. Click here to access all DSPG’s ratings. It is ranked #13 in the same industry.
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