These chip companies have been taken out with the garbage, but they’re far from last night’s trash.

Tech stocks have been hammered this year, but the cyclical semiconductor industry has been hit especially hard. The market thinks a severe cyclical downturn is coming, hastened by slowing global economic growth and maybe even a recession. Semiconductor stocks are down 44% year to date as measured by the iShares Semiconductor ETF .

There are some real gems in this industry, though. Designing and manufacturing technology’s most basic building blocks is ludicrously technical, creating businesses with strong competitive advantages and fat profit margins. The sharp sell-off looks like an opportunity to three contributors. They think Intel ( INTC -1.93%), Micron Technology ( MU -3.90%), and ASML Holding ( ASML -6.48%) are a buy for the long haul. Here’s why. Long-term winner Intel is on fire sale for shortsighted reasons

Anders Bylund (Intel): Chip giant Intel is having a rough year. The stock has lost more than 50% of its value over the last 12 months, falling far behind the S&P 500 index’s 18% drop. Intel shares are trading at prices not seen since the spring of 2014.

Over that eight-year period, Intel’s top-line sales have increased by 39% while earnings before interest, taxes, depreciation, and amortization ( EBITDA ) rose by 62%. As a result, the stock now trades at the lowest price-to-sales and price-to-EBITDA ratios in Intel’s legendary history.

This situation would make sense if Intel was knocking on death’s door, stumbling at the edge of the abyss, flirting with bankruptcy. In all fairness, both revenue and profits have slowed down in 2022 due to economic pressures. However, the company still collected $73.4 billion of revenue over the last four quarters while generating $12.6 billion in normalized net income and $33.8 billion of EBITDA profits.

Intel is operating under a relatively fresh management team, which still has to operate under the three-to-five-year processor development cycle its predecessors started. That’s not easy, especially during a global economic crisis and a multi-year shortage of semiconductor manufacturing capacity. And don’t forget that the previous leadership group was a hastily thrown-together emergency solution, led by Intel’s former CFO Bob Swan. The new group has a lifelong engineer at the helm in Pat Gelsinger, and his management style has zeroed in on innovation and sustainable execution for the long haul.

Under Gelsinger’s reign, Intel’s manufacturing process improvements are back on track with their long-term improvements. Furthermore, the company is investing billions of dollars in new, expanded, and upgraded chip-building facilities in places like Arizona, Ohio, Germany, and Italy. In fact, Gelsinger is reselling Intel’s manufacturing capacity to other semiconductor designers, opening up a brand new revenue stream and helping the chip industry pull itself up by its collective bootstraps.

Intel is an industry titan with unmatched financial resources and ambitious plans for the long haul. You can call 2022 a rebuilding year, setting the stage for a clean bill of operating health in 2024 and beyond. It makes a ton of sense to pick up Intel shares while market makers are slashing share prices for shortsighted reasons. That’s a smart investment that should deliver fantastic returns in the long run . This memory chip stock is about as cheap as you’ll ever see it

Billy Duberstein (Micron Technology): Memory chip manufacturer Micron had a terrible quarter when it reported fiscal fourth-quarter results on Sept. 29, with revenue down 23% quarter over quarter. Management guided for an even worse current quarter, with revenue set to fall another 36% and profits to drop to essentially breakeven.

Memory demand and pricing have plummeted as interest rates have risen and companies pulled back after the pandemic boom in digitization. This has been especially acute in the PC industry, where shipments were down a stunning 19.5% relative to last year in Q3, according to Gartner .

Miraculously, Micron’s stock is still around levels it traded at three months ago, prior to reporting the past two dismal quarters. That shows just how cheap the stock had become. Micron now hovers just above 1.1 times book value , which is close to trough valuations seen over the past decade. Memory pricing should improve over time, however. Micron and its competitors have announced dramatic cutbacks in production for the year ahead, with Micron cutting capital expenditures by one-third, including a near-50% reduction in semiconductor equipment investment in 2023. The day after Micron’s announcement, Japanese NAND flash competitor Kioxia, which partners with Western Digital , announced a 30% reduction in NAND flash […]

source 3 Beaten-Down Semiconductor Stocks to Buy for the Long Haul

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