NEW YORK (TheStreet) –– Though semiconductor stocks have had a strong year in 2014, with the Philadelphia Semiconductor Index gaining more than 28%, JPMorgan (JPM) expects several semiconductor-related names to continue to do well in 2015, as margins expand, free cash flow improves and the companies focus on returning cash to shareholders.
"In our view, despite weakness in some end markets such as handsets (outside of the Apple food chain), China wireless infrastructure, and China industrials, we believe the outlook into 2015 is generally tracking typical seasonality," JPMorgan analyst Harlan Sur wrote in the year ahead outlook. "We continue to view the semiconductor industry as more stable / less cyclical characterized by mid- to high-single-digit annual revenue growth going forward. We currently estimate 2015 Y/Y revenue growth of 3-5% and 2015 Y/Y earnings growth of 6-10%."
JPMorgan notes that the large cap semiconductor names are trading at only 16 times 2015 estimates, while the SOX as a whole trades at 15x earnings.
Without further ado, here are the six semiconductor related names that JPMorgan thinks will have a banner 2015, with the strategy (Growth, Value, Income) next to the investment bank's rating:
Micron (Growth Name, Overweight Rating)
"We expect memory fundamentals to remain favorable driven by ongoing industry consolidation, disciplined wafer capacity growth, and strong demand from diversified end-markets. Near term, we believe Micron will benefit from improved PC fundamentals/Grantley server upgrade cycle and memory content increases in mobile devices. With improved operating performance, the company has been restricting its convertible debt and reducing its fully diluted share count. Micron trades at 10x our CY15 estimated earnings, a discount to S&P and SOX indexes."
Yesterday's Closing Price: $34.86
Market Cap: $38.27B
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