7 Semiconductor Stocks Recommended by Goldman Sachs

Goldman Sachs published a report entitled “Americas: Technology: Semiconductors” on January 2, 2012. The report isn’t publicly available but we will summarize its main points. In their report, James Covello, James Schneider, Mark Delaney, and Gabriela Borges suggest that the semiconductor sector is expected to perform better than the semi production equipment sector. Semiconductor shipments are currently below trend and fundamentals are likely to improve in the second quarter of 2012. Orders for semi production equipment, on the other hand, are likely to decline by mid-2012. In this article we will focus on Goldman Sachs’ favorite stocks in this industry.

Goldman Sachs Group Inc (NYSE:GS)

Aeroflex (ARX) engages in the design, engineering, manufacture, and sales of microelectronic products. It has been given a buy rating by Goldman Sachs (GS) which believes that Aeroflex is the most likely stock in their coverage universe that will be acquired in 2012. The company’s ability to do a tax-free spin of its Test and Microelectronic segments will be a positive catalyst for the company in 2012. Growth in 4G LTE is also expected. Shares of the company are currently trading at $12.7 per share and are expected to go north of $14. George Soros had $19 million invested in ARX at the end of September.

Altera (ALTR) is a semiconductor company that designs, manufactures, and markets programmable logic devices, and other products. Goldman Sachs has given it a buy rating and it expects Altera to revert to its previous shipping trends in 2012. With its increased exposure to wireless spending, continued share gains, and its exposure to OEM customers; Altera is expected to outperform in 2012. Shares of the company are currently trading at $37.5 per share and are expected to reach a price target of $44. This price target is based on 17x the normalized earnings per share estimates of $2.60. Billionaire Jim Simons’ Renaissance Technologies had $170 million invested in Altera at the end of the third quarter.

NXP Semiconductors (NXPI) provides mixed signal solutions and semiconductor components. It has been given a buy rating by Goldman Sachs which believes that NXP Semiconductors is best positioned to realize earnings leverage from the bottom of the cycle. With higher utilization, higher sales volume and a shift away from standard to high margin segments, the company is expecting to perform better in 2012. Shares of the company are currently trading at $17.6 per share and are expected to reach a price target of $19. This price target is based on 9x the normalized earnings per share estimate of $2.10. Ricky Sandler’s Eminence Capital initiated a brand new position in NXPI during the third quarter.

Atmel (ATML) is a designer, developer, manufacturer, and marketer of a range of semiconductor integrated circuit products. It has been given a buy rating by Goldman Sachs. A sustainable growth in Atmel’s core microcontroller business, a higher normalized earnings power, an increase in gross margins, and a solid growth in touch controllers will all be positive catalysts for the company in 2012. Its stock is trading at 12x the 2012 earnings per share. Also, its shares are currently trading at $8.9 per share and are expected to reach a price target of $10. Coatue Management initiated a new position in ATML during the third quarter.

Broadcom (BRCM) is a designer and developer of semiconductors for wired and wireless communications. Goldman Sachs has given the company a buy-rating and it remains bullish on Broadcom’s growth opportunities. Broadcom is in a good position to benefit from a growth in the low and mid-range Android smartphone devices. With the introduction of its new 802.11AC WiFi standards, the company is expected to have a stable market share. Shares of Broadcom are currently trading at $31 per share and are expected to go north of $41 by the end of 2012. The price target is based on 18x the normalized earnings per share of $2.30. Bain Capital had $228 million in BRCM at the end of September.

InvenSense (INVN) designs, develops, markets, and sells micro-electro-mechanical systems. Goldman Sachs has given the company a buy rating as it believes that InvenSense is in a unique position to offer growth to investors. Sales are expected to grow at a 35% compounded annual growth rate over the next two years. Goldman Sachs is also of the opinion that motion sensor attach rates are at an inflection point in the smartphones sector, giving InvenSense significant exposure to a positive catalyst. The company is also likely to benefit from the rapid expansion of Android. Shares of InvenSense are currently trading at $13.2 per share.

Semtech (SMTC) engages in the design, production, and marketing of analog and mixed-signal semiconductor products. It has been given a buy rating by Goldman Sachs because Semtech is expected to outperform the analog group. Its growth will likely be caused by the build-out of new optical networks and a strong growth in smartphone units. The company is currently rolling out its best-in-class protection franchise for the smartphone sector. Shares of the company are trading at $25.9 per share and are expected to reach a price target of $30, based on 18x the normalized earnings per share estimate of $1.65. Ken Griffin’s Citadel had $24 million invested in SMTC at the end of the third quarter.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!