Semiconductor stocks have been out of favor in 2022. There is, however, a catalyst that can change this downtrend now. The U.S. has passed the CHIPS and Science Act, which includes $52 billion in subsidies to entice companies to manufacture semiconductors domestically.
The future of semiconductor stocks therefore seems bright, as there will be large demand for everything related to chips.
These billions in the CHIPS Act will help the semiconductor industry grow, develop, innovate and become more important in our daily lives. These seven semiconductor stocks to buy before the bull market returns all will ride this positive momentum.
Semiconductor Stocks to Buy Before the Bull Market Returns: Taiwan Semiconductor (TSM)
Taiwan Semiconductor (NYSE:TSM) stock has lost 40% in 2022 — and this is great news. Why? It means investors can buy top semiconductor stocks at a large discount. The stock has a forward dividend yield of 1.9% and a 1-year price target of $119.
There are so many positive factors to like about TSM stock now. The firm has demonstrated momentum in its sales growth over the past two years, and its profitability is outstanding. Diluted EPS grew 50% in 2020 and another 15.9% in 2021. The free cash flow trend is very strong, and the company has strong momentum in beating EPS estimates.
Beating EPS estimates four times in a row is not an easy task. In the second quarter of fiscal 2022, Taiwan Semiconductor reported EPS of $1.55, beating estimates by 5 cents. Its revenue of $17.83 billion beat by $327.19 million.
Micron Technology (MU)
Micron Technology (NASDAQ:MU) has been very pleased by the passage of the CHIPS Act and has announced it will grow its domestic production in the years ahead.
MU stock has lost 45% of its value in 2022 but it is hard to find any reason not to invest in it. It is very cheap, trading at a P/E ratio of 5.77x.
Revenue growth for the forward year is expected to slow. However, when you look at the total picture, with EBIT growth (FWD) of 11.7%, and EPS diluted growth (FWD) of 14%, these are key reasons to be optimistic for a rally in MU stock.
Semiconductor Stocks to Buy Before the Bull Market Returns: Intel (INTC)
Intel (NASDAQ:INTC) stock has faced selling pressure in 2022, losing approximately 48% of its value. The second-quarter 2022 financial results were not good as the tech giant not only missed expectations, but also cut its outlook for the full year.
I consider INTC now a contrarian and a deep-value stock pick. Why contrarian? The shares are now deeply oversold. The valuation of Intel now is a key reason to grab its shares. While you will be waiting for a rebound, you will get a forward dividend yield of 5.3%.
Except for the PEG ratio, INTC stock trades at a nice discount to all other key financial metrics. Intel is having trouble in growth, but it is a company that has performed well in both net profits and in generating tons of positive free cash flow. Recently “Intel Corp. CEO Pat Gelsinger said the tech giant was at the bottom on a long-term turnaround effort,” and this is a great reason to be optimistic.
I have no doubt Intel will recover soon, and a rebound in its stock price is very likely.
Skyworks Solutions (SWKS)
Skyworks Solutions (NASDAQ:SWKS) stock is now very attractive with a trailing P/E ratio of 11.8x and a forward dividend yield of 2.5%.
I have mentioned numerous times before that judging a stock solely by its price is a huge mistake as a cheap stock can get cheaper if the fundamentals are out of sync with the business prospects. I am therefore very bullish on SWKS stock as the company is generating consistently positive free cash flow.
In 2021, free cash flow grew 39.45% to $1.13 billion and there is anticipated growth in several other key metrics.
Revenue growth (FWD) is 19%, EBITDA growth (FWD) is 21% and ROE growth (FWD) is 6%. With this growth, it is hard not to be bullish about the future of SWKS stock now.
Semiconductor Stocks to Buy Before the Bull Market Returns: KLA Corporation (KLAC)
KLA Corporation (NASDAQ:KLAC) is one semiconductor company that it is hard not to include in a list of hot stocks to buy. The company is doing everything exceptionally. It has increased its sales growth over the past four years and has turned these sales into great profits. The profitability of KLA Corporation is remarkable as net income grew 70.8% in 2021 to $2.08 billion.
You will also like its free cash flow trend that is not only positive, but has gained momentum in 2020 and in 2021 with growth of 59.10% and 20.12%, respectively. This semiconductor firm is on fire beating its EPS estimates. It has reported better-than-expected results in all past four quarters.
ON Semiconductor (ON)
ON Semiconductor (NASDAQ:ON) has seen its share perform better than other semiconductor stocks as they have moderate losses of approximately 5% in 2022. The company reported its second-quarter 2022 financial results in August, which were very strong.
The firm reported record revenue of $2.1 billion, a 25% year-over-year increase, increased its operating margins and improved its earnings per share. This is a great financial performance that should boost the stock price higher.
There is lot of anticipated growth as EBIT growth (FWD) is 71% and EPS diluted growth (FWD) is 80%.
The profitability trend is very robust with net income growth of 332% for 2021, and the firm generates a lot of positive free cash flow with a growth of 221.94% in 2021.
Semiconductor Stocks to Buy Before the Bull Market Returns: Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) should be at the top of your list of stocks to buy. The decline of 30% in 2022 for QCOM now stock presents a great investment opportunity.
The momentum in EPS is very strong, as the firm reported better-than-expected results in all past four quarters. In the third quarter of fiscal 2022, the company reported EPS $2.87, a beat by 9 cents, and revenue of $10.93 billion, a beat by $74.53 million.
The company is expected to continue to deliver growth in important key metrics, catalysts for a move higher in its stock price. The EBIT growth (FWD) is 44%, the EPS diluted growth (FWD) is 46%, and operating cash flow growth (FWD) is 43%.
Is the 1-year target of $185 feasible? I argue it is, and the forward dividend yield of 2.5% can only increase the total return. QCOM stock is simply a top stock now at a great price.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.