Chip stocks may have struggled so far this year, but one analyst says investors should be buying these 3 chipmakers now.
Nvidia (NASDAQ: NVDA) was up 7% Friday after it reported better than anticipated Q2 earnings.
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The chipmaker reported earnings of $1.24 per share, compared to estimates of $1.15, on revenue of $2.58 billion.
While this gave Nvidia a nice boost, chip stocks have had a difficult year amid the trade war and slowing sales.
The semiconductor industry is exposed to the trade conflict as the U.S. and China represent key markets for the space and with the bulk of its supply chain based in Asia.
But with Tuesday’s announcement that some of the products on President Trump’s latest round of tariffs would be delayed until mid-December, Bank of America (NYSE: BAC) says there are a few chip stocks worth buying.
“Even if tension easing proves to be just symbolic (kicking can down the road)… it’s a near-term sentiment positive and shows US/China governments can be flexible,” Bank of America analyst Vivek Arya wrote in a note.
The analyst also said that the tariff postponements on some goods are strategically timed to help avoid an impact on the holiday shopping season, with names like Apple (NASDAQ: AAPL), Best Buy (NYSE: BBY), Nike (NYSE: NKE), and toy makers Hasbro (NASDAQ: HAS) and Mattel (NASDAQ: MAT) gaining on the news that the delay included “cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”
Arya likes three chip names in particular.
At the top of his list is Nvidia, which he says has a “superior long-term growth profile in large, under penetrated markets.”
The analyst has a $225 price target on Nvidia, suggesting possible upside of 41% over the next twelve months.
Next, Arya says chipmaker Analog Devices (NASDAQ: ADI) has “best-in-class profitability,” and set his price target for the stock at $130 – nearly 18% higher than Friday’s closing price.
And finally, the Bank of America analyst likes KLA-Tencor (NASDAQ: KLAC). Arya wrote that the company is in a “unique position as a key enabler of semiconductor manufacturing technology.”
Arya set his price target for KLAC at $150, indicating possible upside of 10% over the next year.
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