Chip Shortage: 14 Chip Stocks With at Least 30% Upside

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The global semiconductor shortage that’s been a pain in many people’s necks throughout this year is going to last 2022. So as the saying goes: If you can’t beat them, join ’em.

A lack of chips has led to shortages of products ranging from electronics and computers to cars and higher prices. However, on balance, the chip shortage hasn’t hurt the semiconductor sector. The

iShares Semiconductor exchange-traded fund
(ticker: SOXX) is up about 18% year to date, in line with comparable gains of the

S&P 500.

The sector has kept up even as shares of the largest companies in the ETF—

Intel (INTC) and

Broadcom (AVGO)—have underperformed. That pair is up about 9% and 14% year to date, respectively, lagging behind the industry and broader market.

The shortage isn’t going away soon. Only Monday, auto parts supplier

Aptiv (APTV) cut sales and earnings guidance for 2021. About 3 million cars that were expected to be built and sold aren’t going to roll off assembly lines because of a lack of chips, the company said.

Investors can make the persisting shortage work for their portfolios by looking at Wall Street’s favorite chip-sector stocks. There are 14 stocks in the chip sector with above-average Buy-rating ratios and are trading with at least 30% upside compared with their average analyst target price.

The 14 stocks, listed by descending order of upside, are: specialty gas services provider

Ultra Clean (UCTT), wafer equipment maker

FormFactor (FORM), processing materials company

CMC Materials (CCMP), chip designer

Cirrus Logic (CRUS), equipment maker

MKS Instruments (MKSI), light-emitting diode technology company

Universal Display (OLED), semi-test company

ASE Technology (ASX), memory maker

Micron Technology (MU), mobile chip giant

Qualcomm (QCOM), semi test and robot equipment maker

Teradyne (TER), chip fabrication giant

Taiwan Semiconductor Manufacturing (TSM), mobile chip makers

Skyworks Solutions (SWKS),

Qorvo (QRVO), and equipment maker

Lam Research (LRCX).

Name / Ticker	Buy-rating Ratio	Recent Price	Target Price	Upside
Ultra Clean / UCTT	100.00%	$43.07	$71.33	66%
FormFactor / FORM	77.80	36.20	48.89	35
CMC Materials / CCMP	57.10	121.55	159.29	31
Cirrus Logic / CRUS	84.60	80.52	105.83	31
MKS Instruments / MKSI	80.00	143.84	213.00	48
Universal Display / OLED	75.00	171.89	251.00	46
ASE Technology / ASX	66.70	6.80	9.70	43
Micron / MU	81.80	69.96	98.32	41
Qualcomm / QCOM	74.30	125.89	175.75	40
Teradyne / TER	68.80	109.28	145.73	33
Taiwan Semi / TSM	70.00	111.22	146.95	32
Skyworks / SWKS	62.10	161.39	213.68	32
Qorvo / QRVO	71.40	165.81	219.48	32
Lam Research / LRCX	70.40	556.82	725.15	30

Source: Bloomberg

The average Buy-rating ratio for the 14 stocks is about 75%. The average upside is almost 40%. Wall Street is more bullish today than it was a year ago. Before the chip shortage was daily news, the average upside for the group of 14 was about 12%.

Accelerating earnings growth is one reason for optimism. For the group, earnings are expected to grow about 18% a year on average, up from about 12% average annual growth posted over the past three years.

While these stocks in the chip sector look like they still have to run despite supply chain woes, a stock screen is just a starting point for more research.

Write to Al Root at [email protected]