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2 Semiconductor Stocks with Impressive Fundamentals and 1 Facing Challenges
Semiconductors are the silicon backbone of the digital revolution. Compute-intensive AI workloads are also priming them for the next wave of secular growth, so it’s no wonder the industry has outperformed the market over the past six months, delivering returns of 62.2% compared to 8.6% for the S&P 500.
Regardless of these results, investors must exercise caution as the rapid pace of innovation can easily turn today’s winners into tomorrow’s losers. Keeping that in mind, here are two semiconductor stocks boasting durable advantages and one we’re swiping left on.
One Semiconductor Stock to Sell:
Himax (HIMX)
Market Cap: $2.38 billion
Taiwan-based Himax Technologies (NASDAQ:HIMX) is a leading manufacturer of display driver chips and timing controllers used in TVs, laptops, and mobile phones.
Why Do We Steer Clear of HIMX?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.2% annually over the last five years
- Sales were less profitable over the last five years as its earnings per share fell by 22% annually, worse than its revenue declines
- High net-debt-to-EBITDA ratio of 8× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Himax is trading at $13.65 per share, or 2.4x forward price-to-sales. Read our free research report to see why you should think twice about including HIMX in your portfolio.
Two Semiconductor Stocks to Buy:
Broadcom (AVGO)
Market Cap: $1.89 trillion
Originally the semiconductor division of Hewlett Packard, Broadcom (NASDAQ:AVGO) is a semiconductor conglomerate spanning wireless communications, networking, and data storage as well as infrastructure software focused on mainframes and cybersecurity.
Why Will AVGO Outperform?
- Market share has increased this cycle as its 33.1% annual revenue growth over the last two years was exceptional
- Offerings are mission-critical for businesses and lead to a best-in-class gross margin of 76.6%
- Strong free cash flow margin of 41.9% enables it to reinvest or return capital consistently
At $397.41 per share, Broadcom trades at 24.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Seagate (STX)
Market Cap: $205.5 billion
One of two remaining major hard drive manufacturers after decades of industry consolidation, Seagate (NASDAQ:STX) manufactures hard disk drives and solid state drives that store data in data centers, cloud systems, and consumer devices.
Why Are We Bullish on STX?
- Annual revenue growth of 32.6% over the last two years was superb and indicates its market share increased during this cycle
- Estimated revenue growth of 42.9% for the next 12 months implies demand will accelerate from its two-year trend
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
Seagate’s stock price of $914 implies a valuation ratio of 35.2x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.