The overall earnings picture continues to improve and most sectors are seeing stronger prospects in 2021 as the second stimulus and vaccines reach more people.
But while we can cheer at the return of retail, consumer discretionary, oil/energy, finance, etc., it’s now clear that some of the hottest sectors of 2020 are set to have another big year in 2021. These would be things like construction (mainly home building), tech and auto.
The stocks I’ve picked today are from the tech sector. They are all top-ranked stocks within the top 50% of Zacks-classified industries. And as many of us already know, that in itself is a good indication of upside potential. In addition, these companies are expected to record double-digit revenue growth rates and double or triple digit earnings growth rates this year.
What’s more, with many retail investors chasing big money with riskier bets, the share prices on these names havent kept up with their bright prospects. So their relative valuation is ridiculously cheap.
Kulicke & Soffa is a leading provider of semiconductor packaging and electronic assembly solutions with exposure to the global automotive, consumer, communications, computing and industrial markets. K&S built on its pioneering role in the space with continued innovation and acquisitions, adding capabilities in advanced packaging, electronics assembly, wedge bonding and a broader range of expendable tools.
The shares carry a Zacks Rank #1 and Growth Score A. The company’s revenue and earnings are expected to grow 78.1% and 234.7%, respectively in fiscal 2021 ending in September. The 2021 estimate is up $1.83 (135.6%) in the last 30 days.
At 16.4X P/E, the shares are cheaper than the S&P 500 and also trading below their own median value of 18.1X over the past year. So it’s a good time to buy.
Alpha and Omega Semiconductor Limited AOSL
Alpha and Omega Semiconductor Limited designs and develops a broad range of power semiconductors that are manufactured at external foundries for incorporation by OEMs in high-volume end-markets like notebooks, netbooks, flat panel displays, mobile phone battery packs, set-top boxes, portable media players and power supplies. Packaging and testing operations are largely done in-house.
The shares carry a Zacks Rank #1 and Growth Score A. The company’s revenue and earnings are expected to grow 35.2% and 167.1%, respectively in fiscal 2021 ending in June. The 2021 estimate is up 57 cents (32.0%) in the last 30 days.
However the stock price hasn’t kept up with the good news. So it’s currently trading at 16.8X forward earnings, which is below the 22.9X of the S&P 500 and its own median value of 18.5X over the past year. So it’s really very cheap.
MaxLinear, Inc. MXL
MaxLinear offers radio-frequency analog and mixed signal semiconductor system-on-chip (SoC) solutions for broadband communication applications in small silicon die sizes that consume less power. Its products enable broadband video display across a wide range of electronic devices, including cable and terrestrial set top boxes, digital televisions, mobile handsets, personal computers, netbooks and in-vehicle entertainment devices.
MaxLinear shares carry a Zacks Rank #1 and Growth Score A. The company’s revenue and earnings are expected to grow 69.5% and 121.6%, respectively this year. The 2021 estimate is up 23 cents (13.4%) in the last 30 days.
The shares trade at 19.4X P/E, well below their median value of 36.1X over the past year and the SP 500. So they are undervalued.
Skyworks Solutions, Inc. SWKS
Skyworks Solutions designs, manufactures, and markets a broad range of high-performance analog and mixed signal semiconductors that enable wireless connectivity. Its 2,500+ analog components are sold to over 3,200 customers in the automotive, home and factory automation, infrastructure, medical, smart energy and wireless networking markets. Some of its most illustrious customers are Amazon, Apple, Alphabet, Microsoft, Arris, Bose, Cisco, Honeywell, Huawei, General Electric and Honeywell.
The company’s shares carry a Zacks Rank #1 and Growth Score A. Its revenue and earnings are expected to grow 46.8% and 67.5%, respectively in 2021 (ending September). The 2021 estimate is up $2.75 (36.6%) in the last 30 days.
But at 18.5X P/E they are really cheap, both with respect to the S&P 500 and their own median value of 23.0X over the past year.
Knowles Corporation KN
Knowles Corporation provides advanced micro-acoustic, audio processing and precision device solutions for the mobile consumer electronics, communications, medical, defense, automotive and industrial markets. It also offers acoustic components, high-end capacitors and mmWave RF solutions for diverse markets.
The shares carry a Zacks Rank #1 and Growth Score A. Revenue and earnings in the current year are expected to grow a respective 12.4% and 89.6%. The 2021 estimate remains unchanged in the last 30 days.
The shares are trading at 16.3X P/E, which is below their median value of 20.7X over the past year and also below the S&P 500. So they are going cheap.