The COVID pandemic has greatly disrupted global supply chains, causing the economic recovery to partially stall. Disruptions to the global semiconductor supply chain have caused severe ripple effects on various other industries that rely on chips.
After experts initially expected the chip shortage to improve during the second half of 2021, some are now not seeing improvement until 2022 or 2023. Malaysia, a critical bridge in the semiconductor trade, is experiencing a surge in COVID cases and a shortage of available workers.
Despite the shortage, Semiconductor stocks have been a major beneficiary, as demand continues to greatly out-pace supply. Here are the three best performing small-cap semiconductor stocks so far in 2021, as of August 31, 2021:
1. SemiLEDs Corporation (NASDAQ: LEDS) – 180.17%
Shares of the Taiwan-based SemiLEDs Corporation has been the top-performing small-cap semiconductor stock in 2021, returning over 180% as of August 31, 2021. Despite an 18% drop over the past three months, SemiLEDs kicked off 2021 in the mid-$3 range and surged to a high of over $30 before settling to its current price of around $10.
The strong share price action would suggest equally impressive fundamental advancements in its operations. However, a deeper dive highlights declining revenues, stagnate operating expenses, and share dilution.
Over the past five years, SemiLEDs has seen average annual earnings growth of 55.7%, which greatly outpaces the overall industry’s growth of 16.6%. However, the company’s fortunes have slipped over the past couple of years. The company’s earnings growth fell to a paltry 20.9% over the past year, as the overall semiconductor industry’s growth has skyrocketed 70.4%.
2. Pixelworks, Inc. (NASDAQ: PXLW) – 174.82%
Pixelworks surged during August 2021, rallying from $3 to $7.75. The U.S.-based company now holds a return of 174.82% for 2021, as of August 31, 2021.
On a forward-looking basis, Pixelworks is estimated to produce annual revenue growth of 33% per year. However, elevated costs are currently suggesting that the company may not be profitable over the next three years.
Analysts remain overall cautious on Pixelworks. A total of four Wall Street analysts cover the stock with two buy and two hold ratings. The analysts have an average consensus price of $8.50, which represents a potential upside of 9.68% from current levels. Important to note is Pixelworks’ most bullish analyst, Sujeeva De Silva of Roth Capital, is also the highest-rated professional with a rating of five stars. De Silva has a buy rating with a $10 price target.
3. MoSys, Inc. (NASDAQ: MOSY) – 152.46%
The San Jose, CA-based company has seen its share price jump over 152% in 2021, as of this writing. Shares started 2021 in the mid-$2 and surged to a high over just under $11, before settling to its current price of $6.16.
First the positives. MoSys is very well-capitalized with a price-per-cash ratio of 2.65 and no debt. This gives the semiconductor company a strong current ratio of 12.10. On a price-to-book basis, MoSys is trading at 2.34 times book value, which is under the industry average of 4.7.
Unfortunately, earnings growth has dramatically slowed recently and the share structure has experienced significant dilution. Over the past five years, MoSys reported annual earnings growth of 44%. However, over the past year, growth has slowed to 12.5%, compared to the overall industry’s 70% earnings growth. MoSys shareholders have seen the outstanding share count skyrocket nearly 145% over the past year.
Disclosure: Neither Matt Rego nor Spotlight Growth have any position or relationship with any companies mentioned in this article. No payment was made to create this article. This article should not be taken as a solicitation or recommendation to buy or sell any securities. Please conduct your own research and consult your financial advisor to determine your risk tolerance and investment path. We are not licensed brokers or investment advisors.