Monday, August 18, 2014
This Weeks Free Stock Pick - Semiconductors
Yesterday I got a little bit excited and decided I’d look into the next generation of smartphones. They’re coming out next month. Apple will have another iPhone for you, and Samsung is coming out with a new Galaxy Note S4 for me. Among the fresh features of the next generation are 4k or UltraHD displays and curved glass. But what will remain the same is a great deal of the hardware that’s inside these devices. The computing power and the wireless data receiver semiconductor chips are being made by the same providers who stand to make big bucks when these phones are mass produced over and over again.
Among the chipmakers that are included is TriQuint Semiconductor (TQNT), our Bull of the Day. TriQuint designs, develops, manufactures, and markets a broad range of high performance analog and mixed signal integrated circuits for communications markets. The integrated circuits are incorporated into a variety of communications products, including cellular phones, fiber optic telecom equipment, satellite communications systems, high performance data networking products and aerospace applications.
Miniature Mobile Giant
The vast majority of TriQuint’s operations are focused on the mobile industry. With the world’s demand for mobile data growing exponentially, the wireless industry is rapidly changing to meet this challenge and build the next generation of mobile devices and network infrastructure. As a result, TQNT has an intense focus on LTE content expansion. They seek to deliver premium filters and high-efficiency broadband amplifiers as well as enable dense RF integration with ultra small packaging. Basically it means they are making their chips smaller, more efficient, and more powerful.
Not stopping with mobile devices, TriQuint is gaining exposure in the defense and aerospace business as well. Their transition to products and away from non-strategic foundry is driving revenue and margins for them. Their top customers on the defense front include Lockheed Martin, Boeing, Northrop Grumman, Raytheon, and the US Department of Defense. Their GaN technology offers greater power, smaller size, fewer parts, and higher efficiency then their current competition.
Zacks Rank #1 (Strong Buy)
The result has been very bullish earnings estimate revisions to go along with a stock price that has been on the rise. This Zacks Rank #1 (Strong Buy) has surprised earnings estimates to the upside for four quarters in a row.
Further, over the last 30 days, three analysts have raised their estimates for the current year and next year. This has pushed consensus up from 31 cents per share for the current year to 51 cents and bounced next year’s consensus up from 50 cents to 75 cents.
All this has contributed to one heck of a run for the stock. After gaping up to break the $10 mark in February of last year, TQNT has barely paused to take a breath on its ride upwards. A few times the stock traded sideways to touch the 25 day moving average shifted by 5 days. After brief consolidation periods and minor sell-offs, TQNT almost always rebounds to head even higher.
Recently the stock has formed a bit of a bullish triangle pattern. Stochastics are in overbought condition so you do have to use a bit of caution when jumping on board. However, you can expect to see stochastics like this during a breakout and that’s exactly what’s happening to TQNT right now. With the spike to a 52-week high intraday today, I’d expect to see an attempt at $20 over the coming weeks.
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