Pixelworks vs. Lattice: Which Chip Stock is a Better Investment?

According to industry insiders, the chip shortage is getting better but far from being solved. In fact, shortages are likely to persist until the end of next year.

Already, we are seeing the impact as auto production is below full capacity with Toyota the latest company warning that production will be less than expected. While it poses a major challenge for many industries, it will benefit the semiconductor industry and lead to greater profits.

Let’s shift our focus to two specific chip stocks worthy of investors’ attention. Below, we provide a look at Pixelworks (PXLW) and Lattice Semiconductor Corporation (LSCC).

PXLW

PXLW designs develop and market semiconductor chips and software that allows for the visual presentation of broadband content through a plethora of electronic devices.

PXLW is currently trading at $5.61. The stock's 52-week high is $6.08. PXLW has a 52-week low of $1.85. The stock has a beta of 2.06, indicating it will move in unison with the market yet is unlikely to prove excessively volatile.

PXLW has a C POWR Rating grade. This low grade means the stock is a Hold. PXLW has Bs in the Sentiment and Momentum components of the POWR Ratings yet it has Ds in the Quality and Stability components. You can learn more about PXLW's POWR Rating components grades by clicking here.

Out of the 99 publicly traded companies in the Semiconductor & Wireless Chip space, PXLW is ranked 85th. Click here to learn more about the stocks in this space.

The analysts have established an average target price of $5.75 for PXLW. If the stock hits this price level, it will have popped by slightly more than 29%. One analyst has established a price target at $7. Of the three analysts who have issued PXLW recommendations, one considers the stock to be a Strong Buy. The other two consider PXLW to be a Buy.

LSCC

LSCC designs and makes logic devices that function as semiconductor components. The company also makes related software for development systems.

LSCC has a forward P/E ratio of 62.79. This is a high ratio. However, the fact that LSCC is a semiconductor makes the elevated ratio that much more acceptable. LSCC has a reasonable beta of 1.03, indicating it will likely hold its value should the market get rocky. The stock is currently trading at $58.11. LSCC has a 52-week high of $61.61. The stock's 52-week low is $26.14.

LSCC has a B POWR Rating. This POWR Rating indicates the stock is a Buy. LSCC has Bs in the Quality, Growth, and Momentum components of the POWR Ratings. You can find out more about how LSCC fares in the rest of the POWR Ratings components such as Value, Stability, and Sentiment by clicking here.

Of the 99 stocks in the Semiconductor & Wireless Chip segment, LSCC is ranked 43rd. Investors can find out more about the stocks in this space by clicking here.

The analysts believe LSCC is underpriced. If these experts are correct, the stock will reach its average target price of $61.30. A rise to this price indicates a 7.6% jump. The highest analyst target price for LSCC is $68. In the past 14 months, the stock's average analyst price target has increased slightly more than $36. It is particularly interesting to note of the dozen analysts who have provided LSCC recommendations, four consider the stock a Strong Buy, four consider it a Buy and four consider it a Hold.

Which is the Better investment?

LSCC is the better of these two chip stocks simply because it has the superior POWR Rating grade of B. Furthermore, it also helps that LSCC is ranked in the top half of its segment while PXLW is ranked in the bottom 15% of its segment. Roll with LSCC and don’t look back.

LSCC shares were trading at $58.33 per share on Wednesday afternoon, up $0.17 (+0.29%). Year-to-date, LSCC has gained 27.30%, versus a 20.91% rise in the benchmark S&P 500 index during the same period.

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.

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