Editor’s note: This column is part of InvestorPlace.com’s Best Stocks for 2021 contest. Louis Navellier’s pick for the contest is Kulicke and Soffa Industries (NASDAQ:KLIC) stock.
- In a tough year for tech stocks, Kulicke and Soffa Industries Inc. (KLIC) stock is down 14%.
- My pick as a top stock for 2022 continues to earn a “B” rating in Portfolio Grader and has potential catalysts to come yet this year.
- The factors impacting tech stocks won’t last forever and Kulicke & Soffa is performing well, so investors should buy KLIC stock at its current low prices.
As 2021 wound down, I published my entry for InvestorPlace’s Best Stocks for 2022 contest. I chose Kulicke and Soffa Industries (NASDAQ:KLIC), a Singapore-based semiconductor stock. Why the choice? After all, few people had even heard of this company.
First, Kulicke & Soffa was in that exclusive group of semiconductor stocks, and we all know the story there. Demand is through the roof and will be for the foreseeable future. This company is not a chip fabricator, but it supplies equipment and tools other companies need for semiconductor manufacture and assembly. In turn, that close involvement helped KLIC stock power to 18% growth in 2020 and a 90% gain in 2021.
Overall, what I was looking to as the “secret sauce” for KLIC stock’s growth potential in 2022 was the company’s Luminex system. This laser-based die transfer system is a key component for assembling mini LED and micro-LED displays. This is cutting-edge display technology just being pushed into the mainstream by Apple (NASDAQ:AAPL) and others.
With that in mind, 2022 is shaping up to be the year the technology explodes — setting up KLIC stock for big gains.
|KLIC||Kulicke & Soffa||$51.96|
Why KLIC Stock is Down
Looking at the performance of Kulicke & Soffa shares so far in 2022, it may appear as though my pick missed the mark. At this point, KLIC stock is down 14.2% so far this year.
What’s going on here? Well, two major issues appear to be at play.
First is the overall tech stock pullback that’s been a major story since last November. There is a lot going on out there that is making investors uneasy. Interest rates are creeping up, inflation is at levels not seen in decades and there is the Russian invasion of Ukraine. Additionally, oil prices are going through the roof, and the supply chain is still far from recovered from the Covid-19 chaos. Speaking of which, waves of Covid-19 variants continue to wreak havoc globally. So, at times like this, investors tend to avoid tech stocks and instead choose historically safer, low volatility sectors.
The second issue is Kulicke & Soffa’s first-quarter earnings results. Sure, first-quarter revenue was up 72% year-over-year (YOY) and diluted GAAP earnings per share (EPS) of $2.11 was up 174% YOY. However, the company issued full-year revenue guidance of approximately $1.58 billion. Considering 2021’s full-year revenue was $1.52 billion, the projection for relatively flat revenue growth hurt KLIC stock.
Apple Releases and Share Repurchases
Kulicke & Soffa has other successful lines of business, including involvement in the electric vehicle (EV) industry. However, it’s the company’s Luminex system and its use in manufacturing mini-LED and micro-LED displays where I’m continuing to focus.
Last year, Apple introduced mini LED displays in several of its key products: the new MacBook Pros and the 12.9-inch iPad Pro. In each of those releases, the new displays were considered a major selling point, winning rave reviews. In other words, Apple is leading the way in popularizing mini LED. Thus, 2022 is shaping up to be the year it goes mainstream, with Apple expected to release an all-new version of its best-selling MacBook Air — with a mini LED display.
Furthermore, a fallback reason for investing in KLIC stock? The company already had an $800 million stock repurchase underway. In March, it announced an additional $150 million as part of an accelerated share repurchase program. That news kicked off the strongest KLIC rally of 2022.
Bottom Line on KLIC Stock
2022 has put the volatility of KLIC stock on full display. Shares have sent investors on quite a rollercoaster ride through the first four months of the year, and disappointing full-year guidance for the year might make you hesitant as well.
However, Kulicke & Soffa tends to be conservative with its guidance. Last year, it revised the expected numbers upward several times as the year progressed. I would not be surprised to see a repeat of that in 2022. And with Apple expected to start taking the wraps off more products with mini LED displays later this year, manufacturers are going to be under pressure to ramp up production. That’s going to mean more demand for Kulicke & Soffa’s Luminex system.
Add in the ongoing share repurchase program, and I feel KLIC stock still has the runway needed to turn 2022 into another growth show. With shares currently down 14% since the start of the year, now is a good time to get on board with KLIC stock if you agree with my assessment. Because if all goes well, it could be one of the best stocks for 2022.
On the date of publication, Louis Navellier had a long position in KLIC. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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