Forget SemiLEDs, Buy These 3 Taiwanese Semiconductor Stocks Instead

Shares of Taiwanese semiconductor company SemiLEDs (LEDS) appear to be significantly overvalued at their current price level considering the company’s weak financials. So, investors seeking to invest in Taiwanese semiconductor stocks could instead consider United Microelectronics (UMC), Himax Technologies (NASDAQ:HIMX), and ChipMOS (IMOS). We think these three companies possess sound financials and are well-positioned to capitalize on the industry tailwinds. Read on for details.Headquartered in Chunan, Taiwan, SemiLEDs Corporation (LEDS) is one of the popular players in the semiconductor space. It manufactures ultra-high brightness light emitting diode (LED) chips with fabrication facilities. The stock has been on a roll, gaining 688.3% over the past year to close yesterday’s trading session at $24.20 after hitting its 52-week high of $31.44.

LEDS’ revenue increased 67% year-over-year to $1.21 million for its fiscal second quarter, ended February 28. However, the company’s net loss for the quarter came in at $254 million compared to $707 million loss in the prior-year period. Its loss per share was $0.06 compared to $0.17 in the year-ago period. But,despite the company’s unimpressive financials, its stock is currently trading at an expensive valuation. In terms of trailing-12-month Price-to-Book ratio, LEDS’ 61.90x is 1,116.1% higher than the 5.09x industry average. And the stock’s 18.52x trailing-12-month EV/S is 301.7% higher than the 4.61X industry average. So, we think LEDS could witness a retreat in the near term. However, there are several other Taiwanese semiconductor stocks that appear to be better investment options now.

Taiwan is known for having a significant market share in the global semiconductor space. With the growing adoption of advanced technologies, such as internet of things (IoT) and artificial intelligence (AI), and the increasing demand for chips across various industries, such as automotive and electronics, the industry is expected to continue benefiting in the coming months. According to a report published by Taiwan News in May 2021, Taiwan is expected to grow 11.4% in 2021 and will contribute to 10.9% growth of the global semiconductor market. So, we think it could be wise to bet on Taiwan-based semiconductor companies United Microelectronics Corporation (UMC), Himax Technologies, Inc. (HIMX), and ChipMOS TECHNOLOGIES INC. (IMOS). Their valuations appear to be in sync with their impressive growth prospects.

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