Wall Street’s top analyst recommends buying two semiconductor stocks — that’s what sets them apart

Investors today have access to vast amounts of information that can help them find the best stocks to buy. In fact, there is so much information that it often leads to overload and confusion instead of giving a clear signal.

As such, it may be best to stick to a no-fuss approach and let the expert stock pickers take the lead. And on Wall Street, Jeffries analyst Mark Lipacis is the best of the bunch right now. According to TipRanks, a platform that tracks and measures the performance of all online financial advisors, 72% of Lipacis' referrals were successful in the past year. At the same time, his decisions have generated an average return of 29.7%. These metrics have made the 5-star expert the top analyst on the street.

Recently, Lipacis penned positive reviews for two semiconductor stocks and believes they are well positioned to move forward from here. So let's see what makes these names stand out from the crowd.

Global Foundries (GFS)

The first semiconductor stock we look at is GlobalFoundries, a major player in the US chip industry with a large multinational footprint. The company is based in Malta, New York and has offices in the US, EU and East Asia, with a large presence in Singapore. The company's products can be found in smart mobile devices, IoT applications, personal computing, automotive, aerospace and defense industries.

Unlike many US-based chipmakers, GlobalFoundries has maintained a strong presence in its home country – with design and R&D centers on the West Coast and manufacturing and foundry facilities in the Northeast. This gives the company an integrated advantage at a time of rising geopolitical tensions with China — a major technology competitor — versus Taiwan — the world's largest chip exporter. GlobalFoundries is also proactive in protecting its intellectual property and recently filed a trade secret misappropriation lawsuit against technology and business giant IBM.

Home advantage and safe secrets are good, but investors want results. GlobalFoundries' Q1 2023 results had some good numbers, but not all the news pleased investors.

Quarterly revenue fell 5% year over year to $1.84 billion, but came in just above guidance, topping it by $10 million. Bottom line, GlobalFoundries non-GAAP earnings of 52 cents per share were up 10 cents year over year and beat estimates by 3 cents. Also of note is that the company reported cash reserves totaling $3.23 billion.

However, the stock fell after the earnings release. Investors were concerned about a miss in adjusted EBITDA ($655 million vs. analysts' expectation of $694.7 million) and the concurrent announcement of management team changes, with new people joining as CFO and CBO.

For his part, top analyst Mark Lipacis is not concerned. Lipacis viewed the pressure as a key benefit, noting that the company has an “onshore” presence in the US. He wrote, “We view GFS as the leading trailing-node analog/mixed-signal manufacturer, capitalizing on IoT demand and customers' shift to a fab-lite model.” We continue to see GFS as a beneficiary of the supply chain nationalization trend. As such, we expect GFS to maintain a premium valuation multiple.”

Based on this stance, Lipacis rates GFS stock as a “buy” and sets a price target of $73, which implies upside potential of 22% within a year.

Wall Street's top analyst is hardly an outlier here. There are 12 recent analyst ratings for GFS stock including 11 “buy” and 1 “hold”, yielding a consensus rating of “Strong Buy”. (See GFS Stock Forecast)

Texas Instruments (TXN)

Next is Texas Instruments, a Dallas-based company with a long history in the technology space. The company was founded in 1930 as an electronics manufacturer and by the 1060s had grown into a strong name in consumer electronics, known for its popular line of calculators and the Speak & Spell educational toy franchise. Today, the company is considered a major supplier of analog technology, electronics and processor chips for industry and is a major supplier of high-tech requirements in both the automotive and aerospace industries. TI remains active in education and has several graphing calculators on the market.

All this is the background of one of the largest technology companies in the world. TI has a market cap of $155 billion and had just over $20 billion in revenue last year. The company also has a solid track record of returning value to shareholders. Since 2004, the company has posted 19 straight years of dividend increases while reducing its outstanding shares by 47%. During the same period, TI also saw 11% annual free cash flow growth.

However, in the most recent reporting quarter, 1Q23, TI showed mixed results. Bottom line revenue was down nearly 11% from Q1'22 to $4.38 billion — but was $10 million better than expected. Earnings per share of $1.85 were down from the prior-year figure of $2.18 but topped guidance by 7 cents, or 3.6%.

However, the company failed on its guide. The outlook for second-quarter revenue was set at $4.17-$4.53 billion, while the consensus was $4.46 billion. As for earnings, the outlook for the second quarter calls for earnings per share in the range of $1.62 to $1.88; The consensus value was $1.87.

Mark Lipacis looks under the hood of TI after earnings release and remains upbeat. He notes the weaker performance year-on-year but is still confident in the long-term.

“We highlighted TXN as our top pick for large-cap analog stocks heading to profitability as it was one of the few analog companies to have had its FY2023 EPS estimates cut significantly (~20%), and has had bottom quartile stock performance year-to-date…We continue to favor TXN as shipments are below trendline and we believe its internal manufacturing strategy will result in stock gains…We remain buyers at press time,” Lipacis noted.

As such, Lipacis reiterated its Buy rating and price target of $215, indicating scope for a 22% stock appreciation over the next 12 months.

Big-name technology companies have consistently attracted the attention of Wall Street, and Texas Instruments has 19 analyst ratings, including 8 buy, 9 hold, and 2 sell — yielding a consensus rating of moderate buy. (See TXN Stock Forecast)

To keep up to date with Mark Lipacis' latest reviews and target price, check out his profile page on TipRanks.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important to do your own analysis before investing.

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