Sequans Communications SA
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Information Technology : Semiconductors & Semiconductor Equipment |
Based in France
Company profile

Sequans Communications SA is a France-based company that develops and provides 5G and 4G chips and modules for massive, broadband, and IoT (Internet of things). The Company provides a product portfolio for 5G/4G massive IoT applications based on Monarch LTE-M/NB-IoT and Calliope Cat 1 chip platforms, featuring low power consumption, a set of integrated functionalities, and global deployment capability. The Company offers a product portfolio for 5G/4G broadband and critical IoT applications based on its Cassiopeia Cat 4/Cat 6 4G and high-end Taurus 5G chip platforms, optimized for low-cost residential, enterprise, and industrial applications. The Company is based in Paris, France and operates as well in the United States, United Kingdom, and Asia in countries such as Israel, Hong Kong, Singapore, Taiwan, South Korea, and China.

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These stocks provide a better way to invest in the electric-vehicle revolution than the car makers themselves

11:17 pm ET October 1, 2021 (MarketWatch)

by Philip van Doorn

Own companies that supply all the EV makers and have high returns on invested capital

The growth path for the electric vehicle industry seems inevitable. Governments are using incentives to encourage consumers to make the switch. Investors have been along for the ride -- shares of Tesla Inc. have risen more 87% over the past year, while Nio Inc.'s stock has gained 175%.

But there are different and potentially more profitable ways to invest in the budding EV wave from here. Zehrid Osmani, co-manager of the Martin Currie International Unconstrained Equity Fund LUISX, projects annualized growth of EV unit sales of 40% until 2030. He shared two factors to consider:

Government policies will help drive the EV revolution. The U.S. auto industry had agreed with the Biden administration to a goal that 40% to 50% of new vehicle sales be electric by 2030. The European Union plans for all new cars registered in 2035 to be "zero emission."

Some investors are already shying away from Tesla (TSLA) and Nio (NIO) because of those stocks' high valuations relative to expected earnings and sales. You can see those numbers here. Shares of both of these EV manufacturers have cooled off -- Tesla is down 3% for 2021, while Nio is down 21%.

But Osmani thinks it is important for investors to participate in what he calls "almost a certain structural growth driver" -- the shift to electric vehicles mandated not only by governments around the world but by consumers.

Growth -- high returns while avoiding the risk of changing tastes

The Martin Currie International Unconstrained Equity Fund is rated four stars (out of five) by Morningstar. During an interview, Osmani said he is playing the long-term transition to EVs by investing in companies that would serve all manufacturers, in industries with the highest returns on invested capital (ROIC).

A company's ROIC is its earnings (less dividends paid out) divided by the sum of its equity and debt. If you are comparing two similar companies, ROIC can provide insight into which management team deploys capital most efficiently.

But ROIC also differs greatly between industries. Osmani summarized his team's ROIC research for several industry group:

For that last category, Osmani said he expects two companies to hit ROIC in the 30% range: Taiwan Semiconductor Manufacturing Co. Ltd (2330.TW) and ASML Holding N.V. (ASML.AE).

Taiwan Semiconductor makes computer chips used in various aspects of EV manufacturing. With $45.48 billion in sales for its most recently completed fiscal year, it ranks second (behind Intel Corp. (INTC), with annual sales of $77.87 billion) among the 30 components of the iShares Semiconductor ETF (SOXX), which tracks the PHLX Semiconductor Index .

ASML makes specialized equipment used by semiconductor manufacturers -- a business Osmani described as "a quasi-monopoly on the high-end tools."

Osmani holds Taiwan Semiconductor and ASML in the fund as well as Infineon Technologies AG (IFX.XE). "Infineon has close to 40% of its revenues generated from the autos end-market, so that is a very highly exposed company to the auto cycle," he said.

Here are average ROIC for the past five calendar years for those three companies:

Company    Five-year average ROIC   ROIC -- 2020  ROIC -- 2019  ROIC -- 2018  ROIC -- 2017  ROIC -- 2016 
Taiwan Semiconductor Manufacturing Co. Ltd. ADR TSM   22.55%  26.83%  19.97%  21.05%  22.09%  22.80% 
ASML Holding N.V. ADR ASML   16.79%  19.94%  16.74%  18.25%  15.42%  13.61% 
Infineon Technologies AG XE:IFX   9.98%  2.96%  8.56%  16.22%  11.35%  10.81% 
Source: FactSet 

We are using calendar years for these figures; Infineon's fiscal year ends in September.

Looking ahead, here are consensus sales estimates among analysts polled by FactSet for the three companies, in U.S. dollars, through calendar 2025 (if available):

Company   Sales -- 2020  Est. sales -- 2021  Est. sales -- 2022  Est. sales -- 2023  Est. sales -- 2024  Est. sales -- 2025 
Taiwan Semiconductor Manufacturing Co. Ltd. ADR TSM   $47,860  $56,402  $65,560  $76,951  N/A  N/A 
ASML Holding N.V. ADR ASML   $16,886  $22,170  $25,387  $27,382  $31,579  $33,506 
Infineon Technologies AG XE:IFX   $10,856  $13,324  $14,711  $15,918  $16,659  N/A 

Each company has a different number of years for which consensus sales estimates are available:

Here are consensus earnings estimates for the group:

Company   Net income -- 2020  Est. net income -- 2021  Est. net income -- 2022  Est. net income -- 2023  Est. net income -- 2024  Estimated net income -- 2025 
Taiwan Semiconductor Manufacturing Co. Ltd. ADR TSM   $18,486  $20,839  $24,195  $28,797  N/A  N/A 
ASML Holding N.V. ADR ASML   $4,289  $6,496  $7,786  $8,700  $10,638  $11,809 
Infineon Technologies AG XE:IFX   $1,042  $1,671  $2,067  $2,362  $2,447  N/A 

Here's a summary of opinion of these three stocks among analysts polled by FactSet:

Company   Share "buy" ratings  Closing price -- Aug. 16  Consensus price target  Implied 12-month upside potential 
Taiwan Semiconductor Manufacturing Co. Ltd. ADR TSM   89%  $114.63  $146.33  28% 
ASML Holding N.V. ADR ASML   71%  $787.35  $797.78  1% 
Infineon Technologies AG ADR IFNNY  81%  $40.42  $48.56  20% 
Source: FactSet 

Keep in mind that analysts who work for brokerage firms use 12-month price targets to drive their ratings. One year is actually a rather short period for a multidecade technological transformation.

As always, if you see any potential investments of interest, you should do your own research and form your own opinion about companies' business strategies and likelihood of continued success.

Don't miss:20 stocks for maximum growth as the world switches to clean energy

-Philip van Doorn


(END) Dow Jones Newswires

October 01, 2021 23:17 ET (03:17 GMT)

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