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Deep Dive: These are Wall Street’s 25 favorite semiconductor stocks for 2022

As we approach the end of a year and the beginning of another, it’s wise to review a winning industry with a built-in advantage: semiconductors.

Chipmakers enjoy unprecedented demand for their products and pricing power during a time of supply constraints. They are primed for growth as bottlenecks subside in 2022 and beyond.

Below is a list of 20 stocks expected to rise the most over the next year, starting from an expanded list of semiconductor makers and companies that produce equipment used by chipmakers.

Semiconductors outperform the Nasdaq-100

The stock-market benchmark for semiconductors and related equipment makers is the PHLX Semiconductor Index
SOX,
-1.00%
,
which is tracked by the iShares Semiconductor ETF
SOXX,
-1.26%
.
The exchange-traded fund holds all 30 stocks in the index, weighted by market capitalization.

That means Nvidia Corp.
NVDA,
-2.06%
,
with a market cap of $755 billion, is the top holding. Nvidia currently makes up 9.5% of the SOXX portfolio. However, the weighting of any stock is is capped at 8% when the exchange-traded fund is rebalanced quarterly.

Many investors who wish to “go heavy” on the information technology sector hold shares of the Invesco QQQ Trust
QQQ,
-0.60%
,
which tracks the Nasdaq-100 Index
NDX,
-0.65%
,
itself made up of the 100 largest non-financial stocks in the full Nasdaq Composite Index
COMP,
-0.59%
.

Here’s how SOXX has performed against QQQ and the SPDR S&P 500 ETF Trust
SPY,
-0.52%

over the past 10 years, with dividends reinvested:

FactSet

Strong growth ahead

Here are consensus sales-per-share estimates through 2023 for the three ETFs, with expected growth rates for next year and expected two-year compound annual growth rates (CAGR):

ETF

Ticker

Estimated sales per share – 2021

Estimated sales per share – 2022

Estimated sales per share – 2023

Expected sales growth – 2022

Expected two-year sales CAGR

iShares Semiconductor ETF

SOXX,
-1.26%

$78.18

$87.18

$95.36

11.5%

10.4%

Invesco QQQ Trust

QQQ,
-0.60%

$71.69

$79.42

$86.98

10.8%

10.1%

SPDR S&P 500 ETF Trust

SPY,
-0.52%

$1,557.42

$1,668.50

$1,758.66

7.1%

6.3%

Source: FactSet

Both the SOXX and QQQ groups are expected to achieve much better sales growth than the broad market over the next two years.

Wall Street’s favorite semiconductor stocks

Your best way to invest in semiconductors may be SOXX, with its diversification and some exposure to American depositary receipts of non-U.S. companies, such as Taiwan Semiconductor Manufacturing Co.
TSM,
-1.45%
.

But some investors want exposure to individual stocks as they shoot for big gains. Nvidia was up 132% for 2021 through Dec. 10.

We began our semiconductor stock screen with the SOXX 30 and broadened the list by adding all companies in the S&P Composite 1500 Index
SP1500,
-0.63%

(made up of the S&P 500
SPX,
-0.53%
,
the S&P 400 Mid Cap Index
MID,
-0.79%

and the S&P 600 Small Cap Index
SML,
-1.26%

) in the “Semiconductors and Semiconductor Equipment” Global Industrial Classification Standard (GICS) industry group.

That brought the initial list up to 58 companies, including three well-known makers of equipment used in solar power systems: Enphase Energy Inc.
ENPH,
+1.07%
,
First Solar Inc.
FSLR,
+0.61%

and SolarEdge Technologies Inc.
SEDG,
+0.11%
.

We looked within the S&P Composite 1500 because it screens-out newer companies that haven’t achieved consistent profitability. Standard & Poor’s criteria for initial inclusion in the index includes positive earnings for the most recent quarter and for the sum of the most recent four quarters.

Starting with our list of 58 semiconductor companies, there are 54 covered by at least five analysts polled by FactSet, and 48 of those have majority “buy” or equivalent ratings. To be more selective, there are 37 companies with at least two-thirds “buy” ratings.

Among those 37, here are the 25 that analysts expect to rise the most over the next year:

Company

Ticker

Closing price – Dec. 13

Consensus price target

Implied 12-month upside potential

Share “buy” ratings

Universal Display Corp.

OLED,
+0.23%

$157.62

$232.58

48%

71%

Azenta Inc.

AZTA,
-1.14%

$102.51

$144.60

41%

83%

CEVA Inc.

CEVA,
-1.12%

$43.86

$61.67

41%

83%

MKS Instruments Inc.

MKSI,
-0.25%

$161.37

$213.20

32%

82%

Power Integrations Inc.

POWI,
-0.28%

$87.82

$115.83

32%

67%

Ultra Clean Holdings Inc.

UCTT,
-3.23%

$55.63

$72.58

30%

100%

Taiwan Semiconductor Manufacturing Co. Ltd. ADR

TSM,
-1.45%

$119.13

$153.01

28%

90%

Kulicke & Soffa Industries Inc.

KLIC,
-7.39%

$66.41

$83.80

26%

80%

ASE Technology Holding Co. Ltd. ADR

ASX,
-2.15%

$7.45

$9.30

25%

70%

Enphase Energy Inc.

ENPH,
+1.07%

$215.02

$263.96

23%

68%

ASML Holding NV ADR

ASML,
-1.30%

$781.84

$952.60

22%

76%

United Microelectronics Corp. ADR

UMC,
-1.71%

$11.33

$13.77

22%

82%

Cohu Inc.

COHU,
-1.25%

$35.63

$42.89

20%

78%

Monolithic Power Systems Inc.

MPWR,
-1.27%

$503.41

$603.29

20%

69%

Axcelis Technologies Inc.

ACLS,
-1.30%

$66.00

$78.33

19%

100%

Smart Global Holdings Inc.

SGH,
+0.39%

$61.15

$72.00

18%

100%

Cirrus Logic Inc.

CRUS,
+4.36%

$90.47

$106.36

18%

77%

Onto Innovation Inc.

ONTO,
+0.46%

$92.29

$107.00

16%

100%

Micron Technology Inc.

MU,
+0.27%

$85.54

$98.15

15%

75%

SiTime Corp.

SITM,
-2.40%

$287.60

$327.67

14%

100%

Qualcomm Inc.

QCOM,
+1.08%

$183.88

$208.54

13%

68%

Analog Devices Inc.

ADI,
-1.26%

$183.43

$207.52

13%

78%

Nvidia Corp.

NVDA,
-2.06%

$301.98

$340.85

13%

81%

FormFactor Inc.

FORM,
-1.43%

$43.12

$48.63

13%

88%

Marvell Technology Inc.

MRVL,
-0.60%

$89.02

$100.28

13%

87%

Source: FactSet

Any stock screen is limited, but can help you begin your own research. Click on the tickers for more about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.

More stock-market considerations for 2022:

A sales surge might make this industry your best stock market play for 2022

Here’s a list of favored dividend stocks with room to pay more for investors worried about 2022

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