The S&P 500 index has gone up around 19% this year (so far). And while there are a combination of factors that might dampen this performance going forward, it does not mean all returns will be lackluster. Investors could be more selective about which stocks they invest in, though, to generate good performance.
The two semiconductor companies below are currently profiting from these industry supply shortages, and their services and products are likely to be in greater demand in 2022 (and going forward). This might mean market-beating returns. Let’s find out some more about these two stocks forecasted to do well in 2022.
If you’ve tried to buying a new gaming console, high-level computer equipment, or maybe a new car in 2021, you have likely had a difficult time getting what you want. The problem is a worldwide lack of semiconductors — the cpus that back all of our electronics. This global shortage is now set to go into the new year.
The auto sector has arguably been the worst affected since vehicles have become more feature-heavy, making them require more advanced cpu power. Many car makers have been forced to lower production this year since they cannot get enough supply of the needed chips.
Cohu is a chip service company that gives handling equipment and testing for some of the top producers worldwide, helping them to increase capacity to alleviate their pressures.
Cohu grew its revenue by 9% between 2019 and 2020, but it is now set to over quadruple that number this year to 41%.
The stock trades at a great discount to its peers as shown by the iShares Semiconductor ETF. This ETF trades with a p/e multiple of 31, with Cohu’s being 10 times (based on the estimated earnings for this year).
As the chip shortage is now expected to go into the new year, so is Cohu’s large opportunity. That may be why one Wall Street investing company believes the stock might go up by over 109%.
2. Axcelis Technologies
Axcelis Technologies also helps the top semiconductor makers in the world, so it is also in line for a really big 2022. But its part in the industry is more technical, as it builds and designs ion implantation equipment used inside the actual fab process.
The company has also changed its focus to the auto segment, which comes under its “Power Device” product line. In fact, in Sept. the company shipped a whole family of its Power implanters to numerous chip manufacturers across Europe and Asia. The company said it is a sign of the increasing electrification of the auto sector — and since this trend is just getting better, Axcelis is very well-positioned for a lot more future growth.
In fact, Axcelis is in line to grow its EPS by around 400% since 2019 thanks to increasing gross margin. Since the firm’s products are in such great demand, it’s creating more of them, which aids in creating scale as fixed costs turn into a smaller amount of overall costs. Also, customers are now willing to pay more; both of these facts have lead to much higher profits.
Author: Blake Ambrose