Semiconductor sales could be impacted after the U.S. decided to double down on its anti-China semiconductor policy. Analyst Vivek Arya promptly capitalized on the news and provided coverage on the semiconductor sector. According to Arya, various blue-chip semiconductor companies could lose up to 10% in annual sales, with Intel (NASDAQ:INTC), NVIDIA (NASDAQ:NVDA), and Lam Research (NASDAQ:LRCX) being the most likely losers.
I decided to juxtapose Arya's argument and place a hold rating on Intel, NVIDIA, and Lam Research, as I believe these enterprises are part of an intra-industry secular growth trajectory that would phase out most systemic headwinds.
IntelIntel has lost almost half of its market value since the start of the year amid an array of systemic headwinds. However, despite its recent stumbles, Intel's embedded growth remains promising, and financial market participants could soon change their attitude toward the stock.
Intel's cash cow is its desktop CPU (central processing units) segment which holds down a market share of 69.5%. Moreover, the company's exposure to the GPU (graphics processing unit) domain is highly lucrative, considering the GPU domain's proliferating at a CAGR (compound annual growth rate) of 33.6%.
Furthermore, Intel's autonomous driving unit (Mobileye) spin-off could be tremendously beneficial as the detachment allows the segment to brand itself more effectively. Intel's set to retain full ownership of the entity, which could streamline its balance sheet while retaining access to valuable future cash flows.
Lastly, Intel provides lucrative total return prospects as the security is undervalued with a price-to-earnings ratio of 6.5x, along with a compelling dividend yield of 5.63%.
Is INTC a Good Stock to Buy?Turning to Wall Street, Intel earns a Hold consensus rating based on four Buys, 15 Holds, and nine Sells assigned in the past three months. The average INTC stock price target of $36.09 implies 36.6% upside potential.
NvidiaNvidia's year-to-date slump is possibly due to two reasons. First is the company's interlinkage with the crypto-mining space, which has clearly taken a hit in the past few months. Yet, I feel as though the narrative is overblown as Nvidia owns approximately 79% of the fast-growing GPU market, servicing an array of industries, including gaming.
The second reason why Nvidia's stock has struggled this year is because of its high beta coefficient. A stock's beta measures its sensitivity to the overall market, and Nvidia was always going to shed weight in 2022's bear market. However, the worst of the broad-based stock market drawdown is likely past us, and Nvidia's stock will likely see impressive returns once the market begins to pivot.
Lastly, Nvidia is on a secular trajectory with a 5-year revenue CAGR of 28.94%. The company's secular trend is a by-product of its product pricing power, communicated by its impressive EBITDA margin of 35.91%.
What is a Good Price for NVDA Stock?Turning to Wall Street, Nvidia earns a Moderate Buy consensus rating based on 23 Buys and nine Holds assigned in the past three months. The average NVDA stock price target of $200.67 implies 68.8% upside potential.
Lam ResearchLam Research is one of the few semiconductor companies that beat its latest financial quarter's earnings estimate, with the company's earnings-per-share beating analysts' estimates by $1.51. Lam Research runs on attractive profit margins, with its operating income leaning on a 31.5% margin of safety. Therefore, it's valid to conclude that the company displays a high degree of operating leverage, meaning its bottom-line earnings is recession resilient.
In recent news, Lam's established a new R&D lab in Bengaluru, India. The workspace is said to be its most advanced scientific facility in the region and is well-placed to leverage the growing intellectual capital pool that India provides.
Furthermore, Lam's market-based prospects are looking up. Citigroup recently listed Lam Research as a conviction play, citing quality as a factor. To elaborate on the latter, quality refers to companies with robust financial statements and wide market shares, which results in outperformance during late-stage bear markets.
Another appealing feature of Lam Research is that it's fundamentally undervalued. The stock's price-to-earnings ratio is at a 37.5% discount to historical averages, meaning that smart-money investors could soon enter the fray.
Is LRCX a Good Stock to Buy?Turning to Wall Street, Lam Research earns a Moderate Buy consensus rating based on 11 Buys and seven Holds assigned in the past three months. The average LRCX stock price target of $533.06 implies 69% upside potential.
My Concluding Thoughts on INTC, NVDA, and LRCX StocksVivek Arya's bearish call on semiconductor stocks should be taken with a pinch of salt as the sector is expanding at an exponential rate. Intel, Nvidia, and Lam Research are three "best-in-class" stocks that could experience an upswing sooner rather than later.
The latest disclosure by House Speaker Nancy Pelosi shows that the Democratic leader has lost a little less than a million dollars in recent trades (buy and sell). The trades were carried out under her husband Paul Pelosi’s name and showed the sale of call options on chip stocks, Micron Technology (NASDAQ:MU) and Nvidia (NASDAQ:NVDA).
Meanwhile, Pelosi exercised call options on technology giant Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) and bought stock worth $2 million (20,000 shares). At the same time, he also let 50 call options on media powerhouse Walt Disney Co. (NYSE:DIS) expire for a loss of $132,824. Interestingly, these trades were carried out just a few days before the House proposed a bill banning members of Congress and their spouses from engaging in individual stock trades.
Notably, the regulatory filing showed that on September 16, Pelosi sold 100 call options of MU stock, marking a loss of $392,575. Also, he sold 50 call options of NVDA stock and recorded a loss of $361,476.
In stark contrast, Pelosi’s made millions by betting on big tech names last year. Let us look at each of the three stocks that have generated a loss for the congressional leader.
Micron Technology (NASDAQ:MU)Micron produces computer memory and computer data storage products, including dynamic random-access memory, flash memory, and USB flash drives. Amid the sluggish demand for personal computers and supply chain snarls affecting the chip industry, MU stock has lost 43.8% so far this year.
What is the Target Price for MU Stock?On TipRanks, the average Micron Technology price target is $65.04, which implies 21.6% upside potential to current levels. Also, analysts have a Moderate Buy consensus rating on Micron stock. This is based on 21 Buys, four Holds, and two Sells.
Nvidia (NASDAQ:NVDA)Nvidia designs and manufactures computer graphics processors, chipsets, and related multimedia software. Owing to the downturn in the semiconductor industry, NVDA stock has lost 60.5% so far this year.
What is a Good Price for Nvidia Stock?Currently, NVDA is trading at a steep discount from its 52-week high of $346.47, representing a good entry point. On TipRanks, NVDA stock has a Moderate Buy consensus rating based on 23 Buys and nine Holds. The average Nvidia stock prediction of $200.67 implies 68.8% upside potential to current levels.
The Walt Disney Company (NYSE:DIS)Entertainment and media powerhouse Walt Disney Co. has several offerings, including amusement parks, media networks, production houses, and direct-to-consumer streaming. DIS stock has lost 37.9% year-to-date, owing to the tough macroeconomic backdrop.
What Are Analysts Saying About Disney?Wall Street analysts are highly optimistic about Disney’s stock trajectory. On TipRanks, DIS stock commands a Strong Buy consensus rating based on 14 Buys and three Holds. The average Walt Disney price forecast of $143.80 implies 47.7% upside potential to current levels.
Parting ThoughtsPaul Pelosi’s recent trades have resulted in a loss this time around. However, his past trades have shown the full potential to attract huge profits. The current macroeconomic backdrop is such that even the best of investors may lose the game. Nonetheless, an investor may choose to follow Pelosi’s trades to make informed decisions.