Growth Stocks To Continue to Outperform
Growth stocks led in 2021, and this trend is likely to continue through the cycle, analyst Rick Schafer said. Data Center/Cloud, 5G and auto are the verticals that are poised for outsized multiyear structural growth, the analyst added.Supply constraints, though curbing upside near term, should materially improve in the second half, the analyst said.
Following $145 billion in semiconductor capital expenditures in 2021, fab capacity, excluding memory, will likely increase by 9 percent in 2022, with the growth weighted toward the second-half, Schafer said.
Data Center and Cloud spend will likely be strong as hyperscalers roll out new AI workloads, the analyst said.
The analyst expects 5G Random Access Networks to accelerate, led by the U.S., along with Europe/Korea. Auto production is also expected to rebound, he added.
“Constraints are well understood and should ease through 2022 following capacity adds,” Schafer said.
Oppenheimer’s Top Semiconductor Picks
Oppenheimer named Nvidia Corporation, Monolithic Power Systems, Inc., Marvell Technology, Inc. and Broadcom Inc. as its top picks.These companies, the firm said, leverage content and share gains in cloud/5G/auto. They are expected to deliver sustained/profitable growth, Schafer said.
Monolithic Power, according to the analyst, has an above-average EPS growth outlook, improving revenue mix away from consumer and toward industrial, communications and networking, improving margin profile, and expected improvements in cash/capital allocation over time, in addition to management’s consistent record of execution.
Marvell is expanding in the high growth cloud/DC market and offers the best pure play 5G infrastructure portfolio in the industry, Schafer said. The company is also positioned for auto growth with multigig 2.5/5G/10G ethernet, he added.
The Semiconductor Stock Rating
Oppenheimer has Outperform ratings on Nvidia, Monolithic Power, Marvell and Broadcom. The price targets for the shares of the companies are:Nvidia: $350 Monolithic Power: $600 Marvell: $100 Broadcom: $720