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International Business Machines Corporation (IBM) is a technology company engaged in providing hybrid cloud and artificial intelligence (AI) solutions. It offers integrated solutions and products that use data and information technology (IT) in industries and business processes. Its segments include Software, Consulting, Infrastructure and Financing. Software segment consists of two business areas: Hybrid Platform & Solutions, which includes software to help clients operate, manage, and optimize their IT resources and business processes within hybrid, multi-cloud environments, and Transaction Processing, which includes software that supports clients’ mission-critical, on-premises workloads in various sectors. Consulting segment is engaged in business transformation, technology consulting and application operations. Infrastructure segment is engaged in hybrid infrastructure and infrastructure support. Financing segment is engaged in client financing and commercial financing business.

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-0.38 (-0.26%)
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12 semiconductor stocks bucking the downcycle trend

1:06 pm ET September 13, 2022 (MarketWatch)

By Philip van Doorn

Analysts' estimates for earnings and sales have plunged for some of the largest chip makers, including Nvidia and Intel, but they have risen for others

Semiconductor stocks have been great outperformers over long periods, but their movement this year underscores how cyclical the industry can be.

Here is a look behind the numbers that are driving down shares of chip makers, followed by a summary of the group's excellent long-term record and a look at what may lie ahead.

Over long periods, investors love to see consensus estimates for companies' sales and profits increasing steadily. What can be better than a smooth upward slope to the right?

The most common valuation metric used by stock investors is the forward price-to-earnings ratio -- a company's current share price divided by the consensus earnings-per-share estimate for the following 12 months. It is reasonable to expect the rolling 12-month estimates to increase as time passes by. Those increases support rising stock prices over time.

A look at the PHLX Semiconductor Index illustrates that some of the P/E denominators have fallen hard recently. This index of 30 U.S.-listed chip makers is weighted by market capitalization and tracked by the iShares Semiconductor ETF (SOXX). Here's a snapshot of the exchange traded fund's forward P/E ratios as of Sept. 2 and June 30:

Current forward P/E  Closing price -- Sept. 2  Consensus EPS estimate -- NTM  Forward P/E -- June 30  Closing price -- June 30  Consensus EPS estimate -- NTM -- June 30 
               13.9                  $358.85                        $25.73                   12.6                  $349.61                                  $27.75 
                                                                                                                                                   Source: FactSet 

This may not look so bad -- SOXX's share price has risen since the end of June and the ETF's rolling 12-month consensus EPS estimate has declined by 7%. Then again, investors aren't pleased -- SOXX is down 34% this year.

Now let's dig into the SOXX 30 for some ugly numbers. Here's a look at changes in rolling forward EPS and sales estimates among analysts polled by FactSet for the 12 largest U.S.-listed makers of semiconductors or related equipment (by market value) since the end of June:

Company                                          Ticker  Change in EPS estimate  EPS estimate -- NTM  EPS estimate -- NTM -- June 30  Change in sales estimate  Estimated sales -- NTM ($bil)  Estimated sales -- NTM -- June 30 ($bil) 
Taiwan Semiconductor Manufacturing Co. Ltd. ADR   TSM                        5%               $6.27                         $5.97                        4%                       $79,992                                 $77,099 
Nvidia Corp.                                      NVDA                     -31%               $4.04                         $5.88                      -16%                       $30,071                                 $36,005 
Broadcom Inc.                                     AVGO                       3%              $40.23                        $39.23                        2%                       $34,878                                 $34,204 
ASML Holding NV ADR                               ASML                      -8%              $18.06                        $19.69                       -5%                       $24,505                                 $25,706 
Texas Instruments Inc.                            TXN                        2%               $9.09                         $8.88                        2%                       $19,893                                 $19,583 
Qualcomm Inc.                                     QCOM                      -1%              $12.98                        $13.08                       -1%                       $46,838                                 $47,269 
Advanced Micro Devices Inc.                       AMD                        3%               $4.67                         $4.54                        3%                       $28,641                                 $27,907 
Intel Corp.                                       INTC                     -26%               $2.57                         $3.47                      -11%                       $68,033                                 $76,143 
Applied Materials Inc.                            AMAT                      -4%               $7.98                         $8.31                       -3%                       $26,215                                 $27,097 
Analog Devices Inc.                               ADI                       -2%               $9.64                         $9.82                       -1%                       $12,135                                 $12,259 
Micron Technology Inc.                             MU                      -51%               $5.18                        $10.67                      -27%                       $26,976                                 $37,165 
Lam Research Corp.                                LRCX                      -1%              $37.29                        $37.83                       -2%                       $19,045                                 $19,417 
                                                                                                                                                                                                                  Source: FactSet 

Click on the tickers for more about each company, including analysts' ratings and the latest financial results and corporate guidance that have driven the estimate revisions. Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on MarketWatch quote pages.

For the chip makers, 2022 has been difficult as industry-supporting trends of the previous two years have reversed. Pandemic-era stimulus, consumer habits and supply shortages worked in the industry's favor or at least supported price increases.

The table above has some notable cuts in EPS and sales estimates:

All but four of the largest 12 SOXX companies have had their EPS and sales estimates increase since the end of June.

Looking again at the full SOXX 30, these 12 companies have bucked the trend since the end of June, with consensus earnings and sales estimates both increasing:

Company                                          Ticker  Change in EPS estimate  EPS estimate -- NTM  EPS estimate -- NTM -- June 30  Change in sales estimate  Estimated sales -- NTM ($bil)  Estimated sales -- NTM -- June 30 ($bil) 
Taiwan Semiconductor Manufacturing Co. Ltd. ADR   TSM                        5%               $6.27                         $5.97                        4%                       $79,992                                 $77,099 
Broadcom Inc.                                     AVGO                       3%              $40.23                        $39.23                        2%                       $34,878                                 $34,204 
Texas Instruments Inc.                            TXN                        2%               $9.09                         $8.88                        2%                       $19,893                                 $19,583 
Advanced Micro Devices Inc.                       AMD                        3%               $4.67                         $4.54                        3%                       $28,641                                 $27,907 
Marvell Technology Inc.                           MRVL                       1%               $2.61                         $2.58                        1%                        $6,717                                  $6,628 
Microchip Technology Inc.                         MCHP                       4%               $5.70                         $5.47                        3%                        $8,199                                  $7,979 
STMicroelectronics NV ADR RegS                    STM                       10%               $3.70                         $3.36                        5%                       $16,381                                 $15,642 
ON Semiconductor Corp.                             ON                        2%               $4.99                         $4.90                        2%                        $8,313                                  $8,141 
Monolithic Power Systems Inc.                     MPWR                       8%              $13.73                        $12.67                        6%                        $2,018                                  $1,898 
Entegris Inc.                                     ENTG                       2%               $4.66                         $4.55                       30%                        $3,819                                  $2,938 
Wolfspeed Inc.                                    WOLF                     366%               $0.47                         $0.10                       11%                        $1,157                                  $1,038 
Lattice Semiconductor Corp.                       LSCC                       9%               $1.88                         $1.73                        5%                          $707                                    $676 
                                                                                                                                                                                                                  Source: FactSet 

(The market caps are not included in the table, in order to reduce its width. You can see the companies' market caps if you click on the tickers.)

Taiwan Semiconductor Co. (2330.TW) is the largest U.S.-listed chip maker by market cap, although Nvidia had that distinction before its share price fell 54% in 2022. TSM itself is down 33% this year.

Have semiconductor stocks fallen enough?

(MORE TO FOLLOW) Dow Jones Newswires

September 13, 2022 13:06 ET (17:06 GMT)

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