Credit Suisse shares its favorite chip stock picks for earnings season

Published Tue, Jan 16 20183:05 PM EST

Semiconductor stocks are undervalued and will keep rallying this year, according to one Wall Street analyst. The iShares PHLX Semiconductor ETF has risen 43 percent in the past 12-months versus the S & P 500's 22 percent gain in the same time period. On the chip sector "for the 6th consecutive quarter, we expect an at least in-line C4Q/C1Q with upside bias," analyst John Pitzer wrote in a note to clients Monday. "Semis remain the cheapest, most levered way to play Data (Create, Store, Transmit, Analyze) in the global economy." Here are four outperform-rated semiconductor stocks recommended by Credit Suisse, along with the firm's current price targets. 1) Analog Devices (ADI) Credit Suisse has a $100 price target for Analog Devices shares, representing 9 percent upside to Friday's closing price. "We see earnings as a positive catalyst; results will begin to drive confidence in future execution … Continued outperformance in B2B with tailwinds in Factory Automation, MIMO, 5G, EV, ADAS, Medical and Mil/Aero along with upside to LLTC synergies underpin our outperform rating." 2) Micron (MU) The firm has a $60 price target for Micron shares, which is 40 percent higher than Friday's close. "While memory is still cyclical, we continue to argue that Memory remains the most structurally undervalued segment of Semis as investors have focused too much on the historical cyclicality and not enough on structural improvements … F2Q bias-to-the-upside is being driven by better than expected DRAM pricing." 3) Marvell Technology (MRVL) Credit Suisse's $30 price target for Marvell Technology shares is 26 percent higher than Friday's close. "Our outperform rating reflects what we believe are multiple paths to a higher share price including: a new management team that is better than investors perception of the 'old- MRVL,' further upside from 'self-help' with a core GM/OpM potential of 65%/35% versus management target of 60%/30%, better growth prospects in storage as HDD most likely has a longer-tail and SSD ... a more vibrant merchant controller market than investors believe." 4) Broadcom (AVGO) The firm has a $335 price target for Broadcom shares, representing 27 percent upside to Friday's close. "We expect AVGO to reported F1Q at least IN-LINE with an upside bias and guide F2Q mostly IN-LINE with CS/Street … Looking beyond the guided quarter, we see continued Rev upside for core franchises thru FY18 driven by additional FBAR [film bulk acoustic resonators] content in handsets, the beginnings of a 802.11ax product cycle in connectivity, 10/50G in wired, and an AI ASICs business which is proving to be larger than the Company originally anticipated."

Source: Analog Devices

Semiconductor stocks are undervalued and will keep rallying this year, according to one Wall Street analyst.

The iShares PHLX Semiconductor ETF has risen 43 percent in the past 12-months versus the S&P 500's 22 percent gain in the same time period.

On the chip sector "for the 6th consecutive quarter, we expect an at least in-line C4Q/C1Q with upside bias," analyst John Pitzer wrote in a note to clients Monday. "Semis remain the cheapest, most levered way to play Data (Create, Store, Transmit, Analyze) in the global economy."

Here are four outperform-rated semiconductor stocks recommended by Credit Suisse, along with the firm's current price targets.