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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Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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