5 Reasons To Invest In Semiconductors, And 5 Of The Best Stocks To Own

Semiconductor and memory stock valuations have gotten a bit extended in the past couple of years, and the semi-cap equipment market may be on the brink of a deceleration in 2018. But despite these hurdles, KeyBanc analyst Weston Twigg says there are plenty of good reasons to be buying semiconductor and memory stocks.

5 Reasons to Buy

In a new report, Twigg said there are five good reasons for semiconductor investors not to fear a slowdown in sales:

1. Semi-cap stocks are generating impressive free cash flow that could be returned to shareholders via dividends and buybacks.
2. Stock valuations remain attractive considering the impressive growth many companies are displaying.
3. The expansion of cloud services, machine learning and big data is providing robust demand.
4. Inefficient 3D NAND scaling and increasing process complexity will keep semic-cap semand extremely high.
5. China’s domestic semiconductor production efforts will be inefficient, leaving plenty of opportunity for leading companies.

Related Link: 2 Up, 2 Down: Goldman Adjusts Semiconductor Stock Ratings

5 Stocks To Buy

In addition to his list of five reasons to buy semi stocks, Twigg also provided a list of his five favorite Outperform-rated stocks to buy:

• Applied Materials, Inc. AMAT, which has extensive product offerings and a large market, as well as the capacity to generate impressive cash flow. KeyBanc has a $57 price target.
• Lam Research Corporation LRCX, which has an excellent management team and trades at a low valuation. KeyBanc has a $202 price target.
• MKS Instruments, Inc. MKSI, which has high earnings leverage and potential to outgrow the rest of the group. KeyBanc has a $100 price target.
• Teradyne, Inc. TER, which has the opportunity to grow its cobot revenue to more than $1 billion by 2021. KeyBanc has a $40 price target.
• Entegris Inc ENTG, which should be able to maintain steady growth despite a deceleration in capex. KeyBanc has a $30 price target.

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