For the average retail investor, the biggest question regarding the stock market today is how do I cut through the noise?
The surest way to do that is to get expert advice. Find the best analysts out there, and watch the stocks they recommend. Wall Street’s top analysts have built their success and reputations on the quality of their calls. And fortunately for us, all of those calls are in the public domain – meaning we can parse that data to find the analyst who stands out from the crowd.
TipRanks has answered that call, compiling a comprehensive database of more than 7,900 analysts. These stock pros are rated and ranked based on the success of their stock reviews and the average return an investor would receive by following those reviews for one year.
On those criteria, Needham analyst Quinn Bolton stands head-and-shoulders above most of his peers. Bolton’s success rate is 69%, and his stock picks have generated ~46% average return.
Now that we know who to trust, let’s check in with three of Bolton’s recent stock picks. These are all Buy-rated equities, and they all show considerable upside in the offing.
Navitas Semiconductor (NVTS)
The first of Bolton’s picks is Navitas, a small-cap chip maker that focuses on gallium nitride (GaN) semiconductors. These are an up-and-coming branch of chip technology, offering advantages in speed, efficiency, and power transfer over older silicon chips. Their biggest advantage, however, is two-fold. First, that GaN chips overlay the gallium nitride layer on a silicon base, meaning they can be produced on existing chip manufacturing infrastructure; and second, GaN chips are smaller than traditional silicon tech, and so more of them can be produced from the same starting amount of silicon. The result, as these chips expand into the market, will be savings in cost and efficiency.
The result will also be gains for companies like Navitas, that are early entrants to the GaN market. Navitas got its start in 2014, and went public through a SPAC merger in October of last year. The company merged with Live Oak Acquisition Corporation II, and the NVTS ticker debuted on the NASDAQ on October 20. Navitas raised approximately $400 million new capital through the merger.
In mid-February of this year, Navitas reported its 4Q21 results. Revenues were up 30% sequentially, to $7.3 million, for the quarter, and up 100% year-over-year, to $23.7 million, for the full year. The company showed a gross margin of 45% for the year, up from 31% in 2020.
Following up the quarterly report, Navitas announced in March that it had shipped a total of 40 million GaN units since 2018, in the ultra-fast device-charger market, with zero reported GaN field failures. This accomplishment underlies the company’s push toward high-power markets; Navitas expects to begin seeing revenues from the data center and EV charging niches this year.
Standing squarely in the bull camp, Bolton rates NVTS a Buy, and his $16 price target implies a robust upside of ~92% for the next 12 months.
Baking his bullish stance, Bolton writes of this company: “We believe Navitas is poised for robust multi-year growth as GaN, with its inherent performance advantages, replaces silicon in a growing number of power conversion applications driving a GaN SAM that should exceed $2bn by 2026. Further, Navitas is the only company in the industry that supplies integrated high power GaN ICs that have advantages over discrete GaN power transistors.”
“With an expected five-year revenue CAGR of 75%+ from 2021-2026, we forecast Navitas will be one of the fastest organically growing companies in the semiconductor industry and believe this growth rate warrants a premium valuation relative to its analog/mixed-signal peers,” Bolton added.
This Wall Street’s top analyst is not alone in his bullish take on Navitas. The stock has 5 positive analyst reviews on record, making for a unanimous Strong Buy consensus rating. The shares are priced at $8.35 and their $16.40 average target indicates room for ~96% appreciation in the next 12 months. (See NVTS stock forecast on TipRanks)
Vicor Corporation (VICR)
The next Bolton pick is Vicor Corporation. This company is provider of power components for both modular and complete power systems, a vital niche in today’s world where portable digital devices are so prevalent. Vicor handles the full process, designing, manufacturing, and marketing the power components that allow digital devices to convert the electricity from primary power sources into direct current that electronic circuits are able to use.
Given the expansion of digital devices into our day-to-day lives, it would seem that a company like Vicor should be on the gravy train. However, the stock is down 62% since it peaked this past November. The reason?
First, we have all heard about the semiconductor chip shortage of the past year or so. This has impacted Vicor in the form of supply, production, and delivery back-ups, resulting in a slowing down of revenue growth. The company’s top line rose in each quarter of 2020, but leveled off in 2021. The 4Q21, of $90.3 million, was up only 7.1% year-over-year. Earnings in 2021 peaked in Q2 and fell off in both Q3 and Q4. Th 4Q21 EPS of 20 cents was down 20% y/y.
Second, Vicor is in the process of building out a new manufacturing facility in Andover, Massachusetts. Construction began in 2019, and this facility is scheduled to ramp up production starting in July of this year – but until then, Vicor is forced to use third-party outsourcing to secure parts and components, which has the effect of raising prices for customers.
And finally, Nvidia, Vicor’s largest customer, is adopting a dual-sourcing strategy on its H100 Hopper data center GPU – a move that at least in part cuts out Vicor from a lucrative market. Vicor still sells parts to Nvidia – but not as many as it had planned.
All of this may spook investors – but Needham’s Bolton still sees potential in Vicor. Regarding the Andover facility ramp-up, he writes, “The outsourcing issue should disappear beginning in July when the company begins production of its vertically integrated manufacturing flow at the expanded Andover facility. Management mentioned seven times on the earnings call that the Andover ramp will enable the company to ‘control its destiny’ and are counting the days until the ramp begins.”
Turning to the Nvidia issue, Bolton describes Vicor as ‘down but not out,’ and writes, “Based on our conversations with industry participants, we believe NVIDIA has adopted a dual-sourcing strategy with the H100 and expect it to ship a version of the H100 SXM5 card powered by Vicor later this year. We still believe Vicor can meet our revenue forecast based on its strong backlog, but acknowledge the multi-sourcing strategy increases the importance of a successful manufacturing ramp of Vicor’s expanded manufacturing facility in Andover.” Bolton also notes that Nvidia will be using multiple suppliers, and expects at least one to be Vicor.
Given all of this, Bolton puts a Buy rating on VICR stock, and his $130 price target indicates potential for a robust 110% upside in the year ahead.
Headwinds and worries have lead to some caution on the Street, although Vicor still has a Moderate Buy consensus rating based on a 2 to 1 split between Buy and Hold reviews. The shares have an average price target of $115, suggesting ~86% upside from the current $61.97 trading price. (See VICR stock forecast on TipRanks)
Credo Technology Group (CRDO)
Last up is the Credo Technology, a fabless chip maker. That is, Credo, through its subsidiaries, designs semiconductor chip and produces prototypes while outsourcing the primary production to the chip foundry sector. Credo’s product line is designed to ‘accelerate throughput and deliver robust end-to-end signal integrity in next-generation platforms.’ Credo’s products include IP/DSP chipsets, line cards, and optical DSPs.
This firm, while it has been in business since 2008, went public in January of this year. The CRDO ticker started trading on the NASDAQ on January 27 in an IPO event that was somewhat downsized. The company cut its offering from 25 million to 20 million shares, and sold them at $10 each, the bottom of the expected range. The offering raised $200 million in gross proceeds for the Credo. On a positive note, the stock gained 16% and closed its first day of trading at $11.65. Since then, Credo shares are up another 11% since then.
Early in March, Credo reported its Q3 results for fiscal year 2022. The quarter, which ended on January 31, included the company’s IPO and was the first release as a public firm. Credo reported $31.8 million at the top line, for an impressive 136% gain year-over-year, and finished the quarter with $240.5 million in cash assets. Non-GAAP diluted EPS, at 3 cents, came in significantly higher than the forecast of a 1-cent loss.
Looking at Credo’s first quarterly results, Bolton is impressed with the company’s execution in recent months, writing: “We believe CRDO is executing well and on the right path to becoming a leader for next gen platforms requiring increased bandwidth, improved power, and lower cost… Leveraging its competitive advantage, we expect Credo to meaningfully outgrow its data center TAM over the next three years and be one of the fastest revenue growth stories in semiconductors over this period. As Credo executes to its revenue forecast, we believe the company’s EV/sales multiple should expand.”
This bullish outlook backs up Bolton’s Buy rating on this new stock, and his $20 price target implies a potential for ~55% upside over the next 12 months.
Some new stocks make a splash, and Credo, judging by the analysts’ reactions is one of these. The 8 published analyst reviews all agree that it’s a stock to buy, for a unanimous Strong Buy consensus view. CRDO is priced at $12.93 and the $21.63 average target indicates a 67% upside from that level. (See CRDO stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
