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The Cheapest Chip Stock to Buy in 2023

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Taiwan-based chipmaker United Microelectronics is trading at a discount to its peers. Although the current uncertain macroeconomic environment means that the company will continue to face soft consumer demand, the demand for chips is expected to remain strong in the long run due to their increasing applicability. Therefore, it could be wise to invest in UMC now. Read more….


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Hsinchu City, Taiwan-based semiconductor foundry United Microelectronics Corporation (UMC) reported a 3.3% year-over-year rise in net sales for December despite high inflation and soft demand. Its net sales for 2022 increased 30.8% to 278.70 million.

Although it missed the consensus EPS estimate in the third quarter by 5.2%, its revenue was 3.9% above the estimate. Its gross margin in the third quarter came in at 47.3%, while its operating margin came in at 40%.

In the third quarter ended September 30, 2022, revenue from Asia-Pacific declined to 62%, compared to 65% in the year-ago period. On the other hand, revenue from North America accounted for 23%, compared to 22% in the prior-year quarter. UMC’s quarterly capacity rose 6.5% year-over-year to 2,539K, and the overall utilization rate remained above 100%.

UMC’s co-President Jason Wang said, “In the third quarter, our results benefitted from product mix optimization and a more favorable exchange rate, while fab capacity remained fully utilized. Despite softening demand in consumer end markets, strengths in certain wireless communications areas drove further expansion in our 22/28nm business, which accounted for 25% of overall third-quarter revenue and lifted wafer average selling price.”

UMC expects its wafer shipments to decline by approximately 10% in the fourth quarter. Its gross profit margin is expected to be in the low-40% range, and capacity utilization will remain at 90%. Its ASP in USD is expected to remain flat.

Wang said, “Moving into the fourth quarter, we expect to face headwinds amid demand weakness, impacted by factors including the inflationary environment and Ukraine war. While UMC will not be immune to the inventory correction affecting the industry, we will work closely with our customers as they adjust to current market conditions. At the same time, we will continue to deliver differentiated technology processes to enable customers’ product pipelines.”

“We have revised the company’s 2022 capital expenditure down to $3 billion, but our capacity expansions in Tainan and Singapore are still progressing as planned in order to meet long-term supply commitments. Despite near-term turbulences, the structural story of increasing silicon content driven by the rise of 5G, AIoT, and EV remains intact,” he added.

Moreover, UMC is trading at a discount to its peers. In terms of trailing-12-month non-GAAP P/E, UMC’s 6.34x is 67.2% lower than the 19.34x industry average. Its trailing-12-month EV/Sales of 1.60x is 40.2% lower than the 2.67x industry average. Also, the stock’s 3.01x trailing-12-month EV/EBITDA is 77% lower than the 13.13x industry average.

UMC has gained 38.8% in price over the past three months and 14.3% over the past six months to close the last trading session at $7.44. Wall Street analysts expect the stock to hit $9.90 in the near term, indicating a potential upside of 33.1%.

Here’s what could influence UMC’s performance in the upcoming months:

Robust Financials

UMC’s operating revenues increased 34.9% year-over-year to NT$75.39 billion ($2.47 billion) for the third quarter ended September 30, 2022. Its operating income grew 99.3% year-over-year to NT$30.17 billion ($990.66 million).

The company’s net income attributable to shareholders of the parent increased 54.6% year-over-year to NT$27 billion ($886.57 million). Also, its EPS came in at NT$2.19, representing an increase of 53.1% year-over-year.

Mixed Analyst Estimates

UMC’s EPS and revenue for fiscal 2022 are expected to increase 42.5% and 18.8% year-over-year to $1.18 and $9.14 billion, respectively. On the other hand, its EPS and revenue for fiscal 2023 are expected to decline 36.4% and 13% year-over-year to $0.75 and $7.93 billion, respectively.

High Profitability

In terms of the trailing-12-month net income margin, UMC’s 31.14% is 876% higher than the 3.19% industry average. Likewise, its 22.10% trailing-12-month levered FCF margin is 195.1% higher than the industry average of 7.49%.

Furthermore, the stock’s trailing-12-month Capex/Sales came in at 21.81%, compared to the industry average of 2.50%.

POWR Ratings Show Promise

UMC has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. UMC has an A grade for Value, in sync with its discounted valuation.

It has an A grade for Quality, consistent with its high profitability.

UMC is ranked #2 out of 93 stocks in the B-rated Semiconductor & Wireless Chip industry. Click here to access UMC’s Growth, Momentum, Stability, and Sentiment ratings.

Bottom Line

UMC is trading above its 50-day and 200-day moving averages of $6.96 and $7.17, respectively, indicating an uptrend. While demand is expected to remain soft due to the current macroeconomic headwinds, the company remains confident about its long-term growth prospects. Moreover, the company’s ongoing capacity expansions will help it meet the rising demand.

Given its robust financials and high profitability, the stock looks pretty cheap at the current price level.

How Does United Microelectronics Corporation (UMC) Stack up Against Its Peers?

UMC has an overall POWR Rating of A, equating to a Strong Buy rating. Check out these other stocks within the Semiconductor & Wireless Chip industry with an A (Strong Buy) or B (Buy) rating: Renesas Electronics Corporation (RNECF), Xperi Inc. (XPER), and Photronics, Inc. (PLAB).


UMC shares fell $0.04 (-0.54%) in premarket trading Thursday. Year-to-date, UMC has gained 13.94%, versus a 3.42% rise in the benchmark S&P 500 index during the same period.


About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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Entrepreneurship

10 Things Every Working Woman Should Do This Year

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Opinions expressed by Entrepreneur contributors are their own.

Self-care has become an all-encompassing term that has strayed from the importance of everyday commodities that keep us in good health and spirits. Though pampering and “treat yourself” moments still have value, here are ten ways to invest in yourself to produce long-lasting, positive results.

Related: 8 Self-Care Tips From Wildly Successful Entrepreneurs

1. Put money into a 401(k)

It’s never too early (or too late!) to start saving for the future. Depending on your employment status, there are different retirement savings accounts. 401(k)s are the most common since these are employer-sponsored and often come with an employer match. However, freelancers also have options, such as a SEP-IRA or a high-yield savings account, to put away extra, tax-free dollars for retirement.

2. Schedule a health checkup

Self-care first includes taking care of your physical health. It’s easy to discredit regular checkups when you’re feeling healthy, but make this the year to get your blood work done. It creates a baseline for your health to identify areas needing improvement or extra attention.

Also, choose areas in your life where you can make small changes. Improving your health doesn’t always mean a drastic overhaul; it may be as simple as drinking more water or adding an extra 30 minutes of exercise to your day.

Related: 3 Key Tips for Optimizing Your Physical Health as an Entrepreneur

3. Review health insurance benefits

Many people with health insurance aren’t sure exactly what it does and doesn’t cover. If you’re unsure, talk with your HR representative or your health insurance provider to get an overview of deductibles, co-payments and other supplemental benefits you may not be aware of. Then, decide if the health care plan makes sense for your current lifestyle.

Are you paying for benefits you don’t use, or do you need additional benefits that aren’t covered? Selecting the right plan will help ensure you have what you need without paying the extra expense for anything you don’t.

4. Ignite your curiosity

Maintaining healthy cognitive functions through new pursuits gives a boost to the brain. Get curious and find what speaks to you. This can be anything from exploring local museums, embarking on different hiking trails, learning a new language or reading more books.

There’s no limit to what you can do, and these activities can ignite more creativity and motivation in your work. While it may be helpful to look to others for inspiration, make them enjoyable so you’ll want to make them a regular occurrence.

5. Prioritize mental health

Mental health has been at the forefront of people’s lives over the past few years, as many have experienced burnout. We often equate productivity with a value that drives us to go beyond our means and leads to anxiety, stress and depression. Take note of your everyday stressors and see how to reduce or eliminate them. Then, replace them with relaxing outlets that allow you to recharge.

There are various ways to prioritize mental health, from practicing positive self-talk to meditation to scheduling an electronics-free day. You may have to try different solutions before you find one that fits.

Related: 5 Ways to Protect Your Mental Health as an Entrepreneur

6. Implement good sleep habits

Consistent sleep is one of the essential factors of good health but one that is often overlooked. For many, it can be challenging to wind down from the workday. Therefore, you must “train” your body to prepare for sleep by getting into a nighttime routine.

Create a sanctuary for yourself to improve your sleep habits. Enjoy a soothing cup of herbal tea, perform a skincare routine, and snuggle in with a good book rather than scrolling through your phone. Additionally, ensure your bedroom is dark and cool for ideal sleep comfort and turn on soothing sounds if it helps lull you to sleep.

7. Try something new

What have you wanted to try but have always held back? Maybe it’s public speaking or contributing to a blog. Whatever “new” has been on your to-do, make a plan, schedule it on your calendar and go for it. It’s common to hold back from these activities due to fear of the unknown or failure, but trying new things helps create confidence and can be the catalyst you need to push you to the next level.

8. Learn to set boundaries

Boundary setting is crucial to relationships yet can be difficult to master. It doesn’t always involve simply saying no to people’s requests. Instead, it requires protecting your own values when people violate them. Setting boundaries may mean spending less time with certain people, removing yourself from toxic situations, or declining invites to events that don’t improve your life. Explore areas where boundaries will help you grow, and keep in mind growth itself is a work in progress.

Related: How to Set Boundaries to Build Thriving Relationships

9. Spend quality time alone

Learning how to enjoy time spent alone is a valuable gift. We are inundated by a false sense of connection through the internet, which often makes us feel lonelier than ever. Then, we overschedule our calendars to make up for human connections, only to feel drained afterward. Slow it down and plan a few solo dates a month to see how it feels to be truly present with yourself.

For those who aren’t used to spending quality time alone, it can feel awkward and uncomfortable initially, but these stem from your own perceptions. Take in a matinee, sit in a coffee shop and read, or enjoy a concert or event you’ve wanted to attend. Alone time has been linked to improved stress management and greater life satisfaction, so it’s worth trying to give yourself more time.

Related: Turns Out, Those Who Like Being Alone Can Be More Creative

10. Get active

Getting active can take on several directions. It can be physical, emotional or spiritual. The point is to engage with people and pursuits that feed your soul. Whether volunteering within your community, setting yourself an exercise goal, or learning more about personal development, there are endless ways to get active and invest in yourself this year.

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Are You a Winner? How to Truly Define Winning in Your Business

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Businesses gauge their performance typically with dozens of goals and metrics. But you can’t do everything at once. The challenge is to get people focused on the one thing that’s most important right now. If it moved in the right direction, it would eliminate a weakness (or capitalize on an opportunity) and improve financial outcomes. You improve that, and you win.

However, not every company clearly defines winning. A catalog of goals can pull the organization in multiple directions and stretch finite resources. Numerous goals can inherently be at odds, working against each other and for conflicting purposes. For example, a cost reduction goal might undermine an innovation goal requiring a significant investment.

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Gen Z Is Making Ugg Boots Fashionable Again: Report

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Ugg boots, the furry, sheepskin boots that defined the 2000s are back, apparently, with spiking interest and Gen Z cachet, according to data from shopping website, Lyst.

The site’s annual quarterly report that highlights the “hottest” 20 fashion brands was released on Thursday, and, as Insider noted, Ugg is on it for the first time since the index began in 2017.

“Gen Z shoppers are breathing new life into once dormant brands … with over 1.2 billion mentions on TikTok — Ugg’s influence is undeniable,” the report notes.

The boots were also sold out of stores during the holidays, it added.

Generation Z, or people born between 1997 and 2012, has demonstrated a penchant for bringing back old technology and trends, from flip phones to “vintage” headphones with cords.

But Ugg boots go back much further — the word “ugg” is actually a general term in Australia that means boots made from sheepskin and fleece, according to the BBC.

The company that created the “UGG” boot, Deckers Outdoor Corporation, is based in the U.S. and has tried and failed to trademark the word in Australia (where a court decided it was a generic word and thus could not be trademarked), the outlet added.

The company says the boots began to gain popularity in California in the 1980s. They were first featured on Oprah’s Favorite Things in 2000 (a huge brand-maker back then) and became “cherished commodities” early in the decade, according to Vogue.

The boots later gained prominence again with a fashion movement that prioritized “ugly” clothes, and have since become an unironic Gen Z favorite, per Insider. Kylie Jenner was also spotted wearing them in November.

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