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Xilinx, Inc. (XLNX)
The PHLX Semiconductor Sector Index’s (SOX) 60% gain easily beats the S&P 500’s impressive 29% increase this year.As the 2020s kick into gear, the industry stands to benefit from several tailwinds: the wider deployment of 5G networks, the increasing amount of Internet of Things (IoT) devices, the growth of artificial intelligence (AI), data centers and storages - all of which count on the semiconductor industry.Against this backdrop, investment firm Rosenblatt Securities recently issued a report with the firm's three semiconductor picks for 2020.
In a narrative that has yet to gain traction or interest from the Street, we see AMD’s roadmaps as unique and strong in both x86 CPUs and GPUs, which have a fundamental advantage in high performance computing (the Frontier supercomputer, for example, uses tightly coupled AMD CPUs and GPUs), and have yet to be copied (Intel has tried the GPU dance for 20 years) or are not legally possible (lack of an x86 license) for Nvidia.”Accordingly, then, the 5-star analyst reiterated a Buy rating on AMD along with a price target of $65, implying potential upside of 42%.
Of the former, Micron was able to circumvent the embargo by exploiting a loophole which showed that a “subset of current products” was not “subject to export administration regulations and entity list restrictions.” Of the latter, Rosenblatt's Mosesmann notes, “We saw clear incremental market signals of shortages (in server DRAM and NAND SSDs), contract prices starting to improve, and Micron/industry supply discipline pointing to a desirable and broader S/D balance as 2020 plays out.”Mosesmann added, “Cycle naysayers or investors looking for broad and unambiguous evidence of a cycle turn will miss the next significant move in the shares, we believe, and it is their timidity that provides us the opportunity entering 2020.
The analyst said, “We see 5G stabilizing in 2020 and continue to view the 5G cycle for Xilinx to be several times larger than current ~$400 million/year baseline 4G business.”Furthermore, Mosesmann pushes the bullish case by noting “FPGAs are at the very early innings of a secular growth dynamic in compute acceleration.”“FPGAs appear to be in the early days of a next wave in computing, reminiscent of when compute GPUs inflected 5-7 years ago for Nvidia (with massive attendance growth at the GPU Technology Conference events), coincident with the decline and eventual cancellation of the Intel Developer Forum (IDF),” the 5-star analyst further added.Xilinx, therefore, is a top pick for Mosesmann, who reiterated a Buy rating on the stock alongside a price target of $165.
A slump in the memory market has knocked the wind out of the chipmaker's sales and margins in recent quarters, but things might start turning in the company's favor sooner rather than later.
The memory specialist recently got a shot in the arm as TrendForce data revealed that the price decline in the DRAM (dynamic random access memory) industry has slowed down.
Micron's fiscal fourth-quarter results revealed a 42% crash in revenue, while non-GAAP net income fell a whopping 85% year over year.
Micron investors can now realistically hope for improved performance in the coming quarters, as memory industry participants have been actively trying to bring down the oversupply.
The company anticipates DRAM bit supply to increase in the mid-teens, while demand is expected to jump between the high teens and 20% range.
Memory makers such as Micron were caught unaware by the sudden decline in demand and were left with excess inventory on their hand, causing a drop in prices.
DRAMeXchange reports that global DRAM revenue increased 4% in the third quarter of 2019, bringing an end to three consecutive quarters of sequential declines.
This small uptick in DRAM shipments bodes well for Micron going into 2020, because a couple of key DRAM-consuming markets are expected to grow significantly next year.
What's more, the forecast says that server demand is all set to clock a compound annual growth rate of 6.5% through 2024 on the back of new data center deployments.
Its trailing price-to-earnings (P/E) ratio of 8.45 is well below the company's five-year average multiple of 12.6, which makes it an attractive bet right now before it becomes a top growth stock once again.
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