Semiconductor and memory stock valuations have gotten a bit extended in the past couple of years, and the semi-cap equipment market may be on the brink of a deceleration in 2018. But despite these hurdles, KeyBanc analyst Weston Twigg says there are plenty of good reasons to be buying semiconductor and memory stocks.
5 Reasons to Buy
In a new report, Twigg said there are five good reasons for semiconductor investors not to fear a slowdown in sales:
- Semi-cap stocks are generating impressive free cash flow that could be returned to shareholders via dividends and buybacks.
- Stock valuations remain attractive considering the impressive growth many companies are displaying.
- The expansion of cloud services, machine learning and big data is providing robust demand.
- Inefficient 3D NAND scaling and increasing process complexity will keep semic-cap semand extremely high.
- China’s domestic semiconductor production efforts will be inefficient, leaving plenty of opportunity for leading companies.
5 Stocks To Buy
In addition to his list of five reasons to buy semi stocks, Twigg also provided a list of his five favorite Outperform-rated stocks to buy:
- Applied Materials, Inc. AMAT 1.31%, which has extensive product offerings and a large market, as well as the capacity to generate impressive cash flow. KeyBanc has a $57 price target.
- Lam Research Corporation LRCX 2.58%, which has an excellent management team and trades at a low valuation. KeyBanc has a $202 price target.
- MKS Instruments, Inc. MKSI 1.61%, which has high earnings leverage and potential to outgrow the rest of the group. KeyBanc has a $100 price target.
- Teradyne, Inc. TER 2.13%, which has the opportunity to grow its cobot revenue to more than $1 billion by 2021. KeyBanc has a $40 price target.
- Entegris Inc ENTG 0.91%, which should be able to maintain…
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