Bear Market or Not, Semiconductors Still Stand to Profit

The semiconductor shortage remains a huge setback to global manufacturing and production. However, the industry as a whole stands to profit from the trend. So it’s likely to continue growing no matter what the stock market does in the short term.

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  • Earnings season is still in its early stages, but looks strong for companies in the semiconductor space, with strong sales, ongoing demand, and improving profit margins.

    One early winner from earnings season is Texas Instruments (TXN). The semiconductor manufacturer beat analyst earnings expectations for the third quarter in a row, with revenues of $4.8 billion.

    Shares have been underperforming in the past year, up just 4 percent compared to higher gains in the semiconductor space, even as the company’s profit margins have closed in on 42 percent.

    Action to take: Shares look attractive here given the company’s strong growth and underperformance over the past year. Investor who buy shares can get a recently-raised dividend that starts at nearly 2.6 percent right now and will likely continue to grow in time.

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  • For traders, the ongoing strength in the semiconductor space make for a call option trade here. The May $190 calls, last going for about $6.20, offer continued upside if shares continue to rally off their strong earnings report.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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