Stocks to sell

Semiconductor stocks were among the most battered names in 2022. A supply glut coupled with slowing sales of personal computers, smartphones and other devices conspired to drag the stocks of nearly all semiconductor and microchip companies lower. Even leading semiconductor companies such as Nvidia (NASDAQ:NVDA) were not spared from the carnage. The PHLX Semiconductor Sector index (NASDAQ:SOX), which is comprised of 30 top semiconductor companies, is down 19% from a year ago. And that’s after posting a 15% gain in January of this year. While the semiconductor industry is starting to show signs of a recovery, there is still a long way to go to get back to the levels seen during the height of the global pandemic. And the recovery so far has not been even. Here are seven sorry semiconductor stocks to sell in February before it’s too late.

INTC Intel $30
WDC Western Digital $44
MU Micron $62.60
MRVL Marvell $48.20
QCOM Qualcomm $135
NXPI NXP Semiconductors $194
AMAT Applied Materials $123

Semiconductor Stocks to Sell: Intel (INTC)

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We’ll start with the worst semiconductor company right now, and that would be Intel (NASDAQ:INTC). The Santa Clara, California-based company has been in the news a lot lately following horrendous earnings that caused the stock to dive 10% and led to job cuts and executive pay being slashed.

Intel reported that it earned 10 cents for the fourth and final quarter of 2022, which was half the 20 cents expected, on average, by analysts on Wall Street. Intel’s Q4 revenue fell 32% year-over-year to $14.04 billion compared to the mean estimate of $14.45 billion that was anticipated,. The company recorded a  Q4 net loss of $664 million, compared with a profit of $4.62 billion  during the same quarter a year earlier. The firm’s forward guidance was equally bad.

Intel blamed the ugly results on declining sales of personal computers and conceded that it is losing market share to rivals such as Advanced Micro Devices (NASDAQ:AMD). In the days since the results, Intel has responded with more job cuts and plans to cut executive pay, including a 25% cut to the salary of CEO Pat Gelsinger.

But investors don’t appear to be having any of it. INTC stock is now down 42% from a year ago and trading at $28 a share.

Western Digital (WDC)

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Western Digital (NASDAQ:WDC), which makes memory chips along with data storage devices, is another company whose stock is getting hammered following its latest earnings print. Western Digital reported a loss of 42 cents a share on revenue of $3.11 billion. Analysts who cover the company were calling for, on average, a loss of 15 cents on revenue of $2.99 billion, according to Refinitiv. WDC stock fell 6% immediately after the results were made public.

The San Jose, California-based company said that the market for its memory chips is going through one of its worst downturns ever. The earnings miss comes as rumors intensify that Western Digital is considering a potential merger with Japan’s Kioxia Holdings. A combination of Western Digital and privately held Kioxia  would control a third of the market for flash memory and enable the new entity to compete against global leader Samsung Electronics.

Rumors of the Kioxia merger come as Western Digital tries to appease activist investor Elliott Management, which targeted the company last year. Over the past 12 months, WDC stock has declined nearly 20% to $42 a share.

Micron Technology (MU)

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Boise, Idaho-based Micron Technology (NASDAQ:MU) is a legacy tech company that has been a going concern since 1978. Its best days were during the dotcom boom of the late 1990s. In many ways, the company and its long suffering shareholders have never recovered from the dotcom bubble bursting in the early 2000s. Today, MU stock trades at $60 a share, down 25% in the last 12 months alone. The stock’s all-time peak came in early 2000 when it was trading at just over $100.

As with Western Digital, Micron is screaming that the bottom has fallen out of the memory chip market, causing a disaster for its finances. Micron’s revenue plunged 47% year-over-year in its fiscal first quarter ended December 1, 2022. Guidance for the current quarter was a horror show, with Micron saying it expects to produce $3.8 billion in revenue in the fiscal second quarter, down 51% year-over-year, and report a net loss of 62 cents a share.

Like a lot of semiconductor companies that have lost market share, Micron is trying to spend its way out of trouble. Specifically, the company has announced plans to allocate $15 billion to build a new memory chip plant in Boise that it says will create 17,000 jobs. While encouraging, the memory chip plant isn’t scheduled to be completed until the end of this decade, at the earliest. Meanwhile, the company continues to talk publicly about the need for more government subsidies to help it compete in a global market.

 Marvell Technology (MRVL)

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The shares of Marvell Technology (NASDAQ:MRVL) have struggled mightily over the last year. Since February 2022, MRVL stock has declined nearly 40% to $45 a share. The company, which makes semiconductors for data storage, communications and consumer markets, has been hurt coming out of the pandemic by supply chain constraints and weakening demand for its products. Marvell Technology most recently announced a new CFO, Willem Meintjes, as it tries to get its fiscal house in order.

In terms of earnings, Marvell most recently reported earnings per share of 2 cents. While that was up from a net loss a year earlier, it still missed analysts’ average  expectations by more than 2%. The company is hoping to turn things around this year as inflation and interest rates moderate and the supply chain problems that vexed it over the last year resolve themselves.

While some analysts remain bullish on the stock, investors should wait for the company to embark on  a real, substantial turnaround before investing in MRVL stock.

Qualcomm (QCOM)

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San Diego-based Qualcomm (NASDAQ:QCOM) makes semiconductors that enable  smartphones and other devices to exploit 5G. While that sounds like a good business to be om right now, Qualcomm’s business and stock are suffering. Growing fears of an economic recession have led many businesses and consumers to hit pause on upgrading to 5G wireless. At the same time, Qualcomm faces intense competition from the likes of Apple (NASDAQ:APPL) and Samsung.

As a result, QCOM stock is down 26% over the past year. Qualcomm has quarterly earnings on deck, but many analysts are forecasting a rough road ahead for the company following lackluster results from other semiconductor companies such as Micron and Marvell.

Qualcomm is also being hurt by a decline of smartphone sales, which fell nearly 10% in 2022, according to market research firm IDC. At the midpoint of its guidance range, the company is calling for its revenue to fall 10% last quarter versus the same period a year earlier.

NXP Semiconductor (NXPI)

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Dutch company NXP Semiconductor (NASDAQ:NXPI) makes microchips and semiconductors for the automotive, industrial and internet of things (IoT) markets. There was some buzz around NXP Semiconductor a few years ago when the aforementioned Qualcomm tried to buy the company. However, Chinese authorities squashed the proposed acquisition and NXP Semiconductor has been largely drifting ever since. In the past year, NXPI stock has dropped 8%. There are currently rumors that Samsung is considering buying NXP Semiconductor, though no deal has been announced.

More recently, NXP Semiconductor has gotten caught up in President Biden’s efforts to limit semiconductor sales and chipmaker activities in China due to security concerns. President Biden has rallied international support for limiting the flow of advanced technologies to China, including from the government of the Netherlands where NXP is based.

The move to curtail technology flows and activities in China is bad news for NXP Semiconductor, which until now had a strong presence in the world’s second-largest economy.

Semiconductor Stocks to Sell: Applied Materials (AMAT)

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Santa Clara-California-based Applied Materials (NASDAQ:AMAT) is a little different than the other companies on this list because it supplies the equipment and software needed to manufacture semiconductors. And its business is only as strong as the semiconductor and microchip market. As that market has slumped over the past year, AMAT stock has declined 15%. The company has been around since 1967 and survived many previous market cycles.

Applied Materials is still waiting for the supply chain snarls that impacted the semiconductor space to ease this year and for orders from leading customers such as Intel and Taiwan Semiconductor Manufacturing (NYSE:TSM) to pick up.

At the same time, Applied Materials is being hurt by President Biden’s efforts to curtail technology shipments and activity in China. Applied Materials said that China accounted for 28% of its 2022 revenue, and that the new U.S. rules could cost it $2.5 billion in lost revenue this year.

On the date of publication, Joel Baglole held long positions in NVDA and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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