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Semiconductor Watchlist: Skyworks, EnPro, AMD, Nvidia

Earnings and government focus on chip supply chains help drive gains.

The Philadelphia Semiconductor Index  is up 6.99% over the past five trading sessions, and is up a rousing 19.47% over the last 30 days.

What’s the impetus for growth?

For starters, the U.S. government’s pledge to help secure the global semiconductor supply chain hit all the right notes for investors.

According to the South China Post, the worldwide semiconductor supply shortage “is among the most urgent issues the US government is focused on,” said Matt Murray, a senior official in the Bureau of Economic and Business Affairs at the State Department.

Uncle Sam has "very much prioritized government to government exchanges and dialogues" to see "what we can do on international engagement to help ameliorate the short-term disruptions," Murray said.

Solid earnings news has also boosted chip stocks, which saw industry-wide share growth over the past week.

“Cyclicals in general outperformed defensive sectors, but it was growth that would dominate the session as a flattening U.S. Treasury yield curve collapsed key spreads, which exacerbated capital flows into the technology space,” said TheStreet’s Stephen Guilfoyle recently on Real Money. “This had kicked off on Wednesday night as Qualcomm  (QCOM) - Get Qualcomm Inc Report beat earnings expectations and raised guidance.”

“Once Wells Fargo's five-star (at TipRanks) analyst Aaron Rakers increased his price target for Nvidia  (NVDA) - Get NVIDIA Corporation Report from $245 to $320 on Thursday morning, it became obvious that semiconductors would lead,” Guilfoyle noted.

On a single day alone - Thursday, November 4 - the Philadelphia Semiconductor Index rose 3.5% on Thursday, while the Dow Jones US Semiconductor Index soared 5.29%.

“Qualcomm and Nvidia ramped 12.73% and 12.04% respectively on Thursday, while Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report popped for a 5.34% gain and Applied Materials  (AMAT) - Get Applied Materials, Inc. Report, KLA Corp.  (KLAC) - Get KLA Corporation Report, Marvell Technology  (MRVL) - Get Marvell Technology, Inc. Report, ON Semiconductor  (ON) - Get ON Semiconductor Corporation Report and Taiwan Semiconductor  (TSMC) all experienced increases of at least 3% on elevated trading volume,” Guilfoyle added.

What semiconductor stocks are poised to move this week? TheStreet’s technology analysts point to the following names:

Skyworks Solutions  (SWKS) - Get Skyworks Solutions, Inc. Report $165.11 5-Day Performance (-) 3.1%. TheStreet’s Action Alerts PLUS team is adding to Skyworks this week.

“We are using Friday's pullback in SWKS shares to scoop up more of them just below our cost basis,” the AAP said this week. “While some may have been disappointed in the company's outlook for the current quarter, the company called for sequential improvement in both revenue and EPS as compared to competitor and fellow RF semiconductor company Qorvo  (QRVO) - Get Qorvo, Inc. Report.”

When Qorvo reported its September quarter results, it too bested expectations but guided its revenue for the current quarter, down sequentially from $1.26 billion in the September quarter to $1.09-$1.12 billion in the current one, with EPS of $2.75 at that revenue midpoint, well below the expected $3.26.

“This along with the favorable outlook issued by Qualcomm QCOM last week tells us that Skyworks isn't feeling as much of the supply chain pinch as others,” AAP noted. “Moreover, the increasing RF semiconductor content per device remains intact, and should drive considerable revenue growth as the smartphone industry mix shifts increasingly toward the 5G product. In addition, there are other opportunities to be had in the IoT and connected auto market as Skyworks integrates its recently completed acquisition of that Silicon Labs  (SLAB) - Get Silicon Laboratories Inc. Report business unit into its existing efforts.”

The AAP’s long-term price target remains $210 for Skyworks.

TheStreet Recommends

EnPro Industries  (NPO) - Get EnPro Industries, Inc. Report $104.55 5-Day Performance 13.21%. TheStreet’s Kirk O’Neil reports that EnPro expects to close its acquisition of NxEdge by the end of 2021, subject to limited closing conditions, including regulatory approvals.

An industrial technology company, EnPro Industries, agreed to acquire semiconductor parts and services provider NxEdge from Thrive Capital for $850 million in an all-cash transaction. NxEdge is an advanced manufacturing, cleaning, coating and refurbishment business that serves semiconductor manufacturers. It’s expected to become a part of EnPro's advanced surface technologies segment.

“The sale is expected to close by the end of 2021, subject to limited closing conditions, including regulatory approvals,” O’Neil reported.

Shares on EnPro on Friday, November 5th closed 8.7% higher at $100.23, with shares on the rise to $105 levels in the past two trading sessions.

Advanced Micro Devices AMD and Nvidia NVDA

AMD $148.55 5-Day Performance 16.39%

NVDA $304.21 5-Day Performance 15.23%

Guilfoyle has a more specific take on two semiconductor mainstays – AMD and Nvidia

“Advanced Micro Devices tacked on 10.14% on Monday, closing at $150.14,” he said. “Company CEO Lisa Su hosted the firm's "Accelerated Data Center Premiere" as the week began and it was a “doozy” Guilfoyle noted.

“First, Meta Platforms  (FB) - Get Meta Platforms Inc. Class A Report, the old Facebook, became (incredibly) the tenth major hyperscale business to jump on the AMD EPYC CPU bandwagon to power its data centers,” he added. “AMD also just unveiled details for the firm's next generation of EPYC processors, the "Genoa" and the "Bergamo." It also revealed the AMD Instinct MI200n series accelerators, which are more able to handle AI (artificial intelligence) workloads.``

As for Nvidia, CEO Jensen Huang touted the future of what the firm calls the "Omniverse" during his keynote address from the firm's recent GTC event. “The Nvidia platform has been downloaded by 70,000 developers and 500 companies,” Guilfoyle said. “It’s currently available in Beta through four verticals that include Showroom, Farm, AR (Augmented Reality) and VR (Virtual Reality).”

Until a few days ago, Guilfoyle had a $276 price target on Nvidia, and a $138 price target on AMD.

“I sold some NVDA on Thursday and again on Monday,” he told Real Money readers. “I sold some AMD on Monday. Discipline is discipline, however, and some blood must be drawn once one is victorious. Hence, those sales.”

Both names, at least technically, appear severely overbought, as Guilfoyle said he would remain long both names, but must place price targets for both under review.

“My revised price targets for these names are likely to be north of $175 for AMD and $350 for NVDA,” he said. “While both names are fundamentally expensive at these levels, there is no denying that something special is going on, the mob is on to it, and no one has any idea how to price it in.”

At this time, without officially setting new price targets, Guilfoyle is increasing his panic points for NVDA to $252 from $212, and for AMD to $124 from $108.

“In case you were going to ask, this is not rocket science,” he added. “For both names, that is where the 21-day exponential moving average (EMA) went out on Monday night, November 8th.”

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