5 Semiconductor Stocks With Upside

NEW YORK (TheStreet) -- The semiconductor equipment and materials industry viewed a number of mergers and acquisitions last year. With competition picking up and margins getting squeezed, many heavyweight companies tried to create cost synergies through mergers and acquisitions. The five stocks from the semiconductor industry completed their acquisitions in the previous year and are likely to do well in 2012.

Based on average estimates of analysts surveyed by Bloomberg, these semiconductor stocks have upsides ranging from 5% to 70%. The buy recommendation and hold guidance for these stocks is 62% and 31%, respectively.

The stocks are listed in ascending order of upside potential.
5. Texas Instruments ( TXN) engages in the design and manufacture of semiconductors it sells to electronics designers and manufacturers worldwide. In addition, it sells calculators and related products. It has a market cap of more than $35 billion.

Of the 43 analysts covering the stock, 56% recommend a buy and 35% rate a hold. Analysts polled by Bloomberg foresee the stock gaining an average 4.6% to $32.14 in the upcoming 12 months.

For the 2011 third quarter, the company reported revenue of $3.47 billion, net income of $601 million and earnings per share of 51 cents. EPS includes 9 cents in charges associated with the company's acquisition of National Semiconductor. During the quarter, orders were $3.07 billion. The company used $450 million to repurchase 14.1 million shares of its common stock and paid a dividend of $148 million.

For the fourth quarter, company expects its revenue to range from $3.19 billion to $3.33 billion and EPS of 21 cents to 25 cents.

In September, TXN completed the acquisition of National Semiconductor for a total consideration of $6.4 billion in cash, according to Bloomberg. Subsequent to the acquisition, Texas consolidated results into its analog segment under the name Silicon Valley Analog.

At the 2012 Consumer Electronics Show, Texas Instruments hosted an OMAP4470 processor-based tablet running on a pre-release version of Windows 8.

4. Applied Materials ( AMAT) is the global leader in providing innovative equipment, services and software to enable the manufacture of advanced semiconductors, flat panel display and solar photovoltaic products. It has a market cap of more than $2.9 billion.

Of the 26 analysts covering the stock, 35% recommend a buy and 54% rate a hold. Analysts have average 12-month price target of $13.06 for the stock, about 11.5% higher than the current price, according to a Bloomberg consensus.

For the fourth quarter of 2011, the company reported net sales of $2.18 billion. Operating income was reported at $361 million and net income stood at $456 million. or 34 cents per share. In the fourth quarter, AMAT generated orders of $1.60 billion. For fiscal year 2011, the company reported orders of $10.14 billion, record net sales of $10.52 billion, operating income of $2.40 billion, and net income of $1.93 billion, or $1.45 per share.

During the quarter, the company paid cash dividend of $106 million and used $175 million to repurchase 16 million shares of its common stock at an average price of $11.04 per share. During the year, AMAT increased its quarterly dividend payment by 14% and returned $865 million to its stockholders through dividends and stock buybacks.

In Nov. 2011, the company completed the acquisition of Varian Semiconductor Equipment Associates for a total consideration of $4.57 billion in cash, according to Bloomberg. The acquisition of Varian enhances its extensive portfolio with market-leading ion implantation technology, a market that represents an annual opportunity approaching $1.5 billion.

3. Microsemi Corporation ( MSCC) offers a comprehensive portfolio of semiconductor solutions for the aerospace, defense and security; enterprise and communications; and industrial and alternative energy markets. It has a market cap of more than $1.5 billion.

Of the 13 analysts covering the stock, 69% recommend a buy and 23% rated a hold. Analysts polled by Bloomberg foresee the stock gaining an average 39.7% to $25.36 in the upcoming 12 months.

For the fourth quarter, the company reported net sales of $227.3 million, an increase of 50.3% over the prior year and 4.9% the earlier quarter. GAAP net income for the fourth quarter of 2011 was $42.1 million, or 49 cents per diluted share, compared to net income of $6.6 million, or 8 cents, in the 2010 fourth quarter, and net income of $30.6 million, or 35 cents, per diluted share in the third quarter of 2011.

For the full year, net sales were recorded at $835.9 million, up 61.3% from fiscal year 2010. GAAP net income was $54.4 million, or 63 cents per diluted share, compared to $59 million, or 72 cents per diluted share, in fiscal year 2010.

For the first quarter of fiscal year 2012, Microsemi expects net sales to increase between $238 million and $246 million. On a non-GAAP basis, the company expects earnings per diluted share for the first quarter of fiscal year 2012 of 38 cents to 42 cents.

In Oct. 2011, Microsemi completed the acquisition of Zarlink Semiconductor an international semiconductor supplier for a total consideration of $448.94 million in cash, according to Bloomberg.

2. Skyworks Solutions ( SWKS) is an innovator of high reliability analog and mixed signal semiconductors. Leveraging core technologies, Skyworks offers diverse standard and custom linear products supporting automotive, broadband, cellular infrastructure, energy management, industrial, medical, military and mobile handset applications. It has a market of approximately $3.39 billion.

Of the 20 analysts covering the stock, 70% recommend a buy and 30% rate a hold. There are no sell ratings for the stock. Analysts polled by Bloomberg foresee the stock gaining an average 56.2% to $28.17 in the upcoming 12 months.

Skyworks in its fourth quarter results, reported revenue of $402.3 million, up 28% year-over-year and 13% sequentially. Net income increased to $64.2 million from $46.8 million in the same quarter previous year. Earnings per share grew to 34 cents from 25 cents in the prior-year quarter. For the full year of 2011, the company reported net revenue of $1.41 billion, up 31.8% compared with $1.07 billion in 2010. Net income grew to $226.5 million, or $ 1.19 per diluted share, from $137.3 million, or 75 cents in 2010.

For the fourth quarter of fiscal 2012, the company anticipates revenue to be up 16% year-over-year in the $390 million range. It expects to deliver non-GAAP diluted earnings per share of 50 cents. Skyworks announced that it will release its first-quarter results of fiscal 2012 on Jan. 19, 2012.

In January 2012, Skyworks completed the acquisition of Advanced Analogic Technologies, Inc. for a total consideration of $162.55 million in cash through a tender offer that Skyworks intends to commence within seven business days, according to Bloomberg.

Recently, the company announced that it has opened a design center in Korea to support the company's increasing demand for 3G and 4G front-end solutions, which grew 150% year-over-year.

1. Spreadtrum Communications ( SPRD) is a fabless semiconductor company that designs, develops and markets baseband processor, radio frequency (RF) transceiver and turnkey solutions for the wireless communications and mobile television market. It has a market cap of approximately $823 million.

Of the 16 analysts covering the stock, 81% recommend a buy and 13% rate a hold. Analysts polled by Bloomberg foresee the stock gaining an average 69.6% to $28.91 in the upcoming 12 months.

For the 2011 third quarter, the company reported revenue of $184.8 million, up 92% from $96.2 million in the same quarter of 2010. Net income for the company grew to $39.3 million from $19.5 million in third quarter of 2010. Earnings per share stood at 75 cents at the quarter end. The company announced a quarterly dividend of 10 cents per ADS payable on Jan. 24, 2012 recorded as on Jan. 9, 2012.

For the fourth quarter, the company expects its revenue to range within $188 million to $194 million and expects gross margin to be 41%.

In Oct. 2011, Spreadtrum completed the acquisition of 85% stake of Mobile Peak Holdings for a total consideration $32.58 million respectively in a cash deal, according to Bloomberg.

Recently, the company introduced 1GHz Android smartphone platforms for TD-SCDMA (SC8810) and EDGE/WiFi (SC6820) and announced that both products are now sampling with customers.

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