Goldman Sachs and Morgan Stanley say these chip stocks have more upside — giving one nearly 50%

Published Thu, Apr 27 20238:45 PM EDT

Chip stocks have rebounded this year after performing poorly in 2022. The PHLX Semiconductor Sector Index is up nearly 17% in the year to date, making this sector one of the brightest spots in the market turmoil. Is there more upside? CNBC Pro trawled through Wall Street research to look for semiconductor stocks that Goldman Sachs and Morgan Stanley expect will grow in value. Morgan Stanley In an April 24 note, Morgan Stanley said it expects a "headwind for most broad based companies" toward the second half of the year. But it expects further upside for the following stocks, which it rated equal weight. Silicon Laboratories : The bank noted the firm's strength in industrial and commercial areas, from which it gained record revenue. It gave the stock a price target of $207, or potential upside of 46%. "SLAB has tracked in-line with our coverage this year, as investors maintain their confidence in SLAB's growth story, justifying its premium valuation relative to the broader semiconductor space," Morgan Stanley analysts wrote. Wolfspeed : Morgan Stanley said execution "will be key" as the company creates new manufacturing capacity. It gave the stock a price target of $80, implying potential upside of 39%. "We continue to see significant long term opportunity for WOLF, as the company's leadership position in Silicon Carbide materials should lead to material growth in both devices and supplies," the bank's analysts said. Silicon carbide is a material used in semiconductor application in many industries. ON Semiconductor : Morgan Stanley said the company could have an earnings stream that is "likely more recession proof than the higher end analog names." "While we have been impressed with the company's execution in recent quarters, the stock outperformance last year has set a high bar," the bank noted. It gave the stock a price target of $89, representing 23.7% upside. Goldman Sachs Goldman named two buy-rated semiconductor stocks in an April 23 report: KLA Corporation and Impinj . It said KLA has benefited from increased adoption of extreme ultraviolet, an incredibly short wavelength of light that is generated in large quantities to print small, complex designs on microchips. Goldman also expects the firm's services business will be less volatile than its wafer processing equipment peers. "Despite near-term [wafer fab equipment] market headwinds, we expect KLA's above-average exposure to technology-buys (i.e. equipment purchases that are tied to process node or technology transitions as opposed to increases in capacity) and its resilient Services business to drive relative revenue and earnings outperformance," it said. Goldman gave the stock a price target of $409, implying 14% potential upside. The bank gave Impinj a price target of $142, or upside of 5%. "We are Buy-rated on PI, and continue to highlight the company as a key enabler and beneficiary of increased RFID adoption in Retail (i.e. General Merchandise), Apparel, and Supply Chain & Logistics," Goldman said. — CNBC's Michael Bloom contributed to this report.