Wall Street analysts are missing the mark on some red-hot chip stocks

Analysts are overshooting their expectations for four major semiconductor stocks.

According to FactSet data, Advanced Micro Devices, Western Digital, Micron and Applied Materials are among the top S&P 500 stocks trading at the largest discounts to their average price targets. Those stocks are currently sitting a respective 42, 35, 31 and 27 percent below Wall Street estimates.

While these names are all down between 7 and 9 percent over the course of the last month, the group as a whole has seen a terrific run. The VanEck Vectors Semiconductor exchange-traded fund has surged 37 percent in 2017, seeing a recent pullback as a rotation out of technology stocks has emerged.

At these levels, Western Digital shares are attractive to Mark Tepper, president and CEO of Strategic Wealth Partners. He likes the stock's forward price-earnings ratio of six times, a relatively low multiple.

"The reason the [P/E ratio] is so low is because PCs remain the biggest users of hard disk drives, and Western Digital is still getting the majority of its revenue from those devices, which are obviously dying," Tepper said Wednesday on CNBC's "Trading Nation."

To counter that, the company has begun focusing in on the ultra-slim laptop, Tepper said, and likes Western Digital's acquisition of SanDisk.

Another name in the space, Micron, looks solid to Todd Gordon, founder of TradingAnalysis.com.

"Micron is showing a relatively sharp pullback, but if you look at the actual distance traveled, set the emotion and volatility aside, and you compare that to the last pullback we saw in early 2017, it's roughly a 19 to 20 percent drop. We just saw that. It's a much sharper drop. But what we've lost, we have held. It's a logical pullback, it's a symmetrical pullback, so therefore support has held," Gordon said Wednesday on "Trading Nation."

He also likes the uptrend in Applied Materials, and thinks the stock's pullback is a healthy development. Elsewhere in the semiconductor space, he is long Nvidia.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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