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Here's Why Onto Innovation (ONTO) is an Attractive Bet Now

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·5-min read
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Onto Innovation ONTO is one stock investors may consider adding to their portfolio to combat the highly-volatile market environment and make some gains from its upside potential.

Wall Street has been facing extreme volatility due to various economic factors. The Federal Reserve announced the biggest interest rate hike of 75 basis points or 0.75% since 1994 to tackle the rising inflation, which has reached a 40-year high in the United States.

The ongoing Russia-Ukraine war, increased crude oil prices and pandemic-induced supply chain woes have made investors uncertain about the global economic recovery.

Onto Innovation Inc. Price

Onto Innovation Inc. Price
Onto Innovation Inc. Price

Onto Innovation Inc. price | Onto Innovation Inc. Quote

The above-mentioned factors are taking a toll on major U.S. indices. Year to date, the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 have plunged 18.3%, 31.8% and 23.4%, respectively.

In such a scenario, growth-rated stocks, such as Onto Innovation can boost one’s portfolio. Amid the current bearish market due to the factors mentioned above, ONTO has only lost 3% in the past year compared with the Computer and Technology industry’s 28.7% decline.

Why Invest in Onto Stock?

The current economic and financial instability has forced investors to invest in stocks with solid fundamentals and management to hedge their funds from any economic downturn.

ONTO stock is down 36.6% from its 52-week high level of $106.09 on Jan 14, 2022, making it more affordable for investors.

Onto innovation has an impressive earnings surprise history. The company outpaced estimates in all the trailing four quarters, delivering an earnings surprise of 11.32%, on average.

Apart from having solid fundamentals, Onto Innovation has the favorable combination of a Growth Score of A and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 and a Growth Score of A or B offer solid investment opportunities.

The Zacks Consensus Estimate of $5.16 per share for fiscal 2022 earnings has increased 5.95% in the past 60 days. For fiscal 2023, the consensus mark for earnings is pegged at $5.66, up 0.53% over the past 60 days.

Onto Innovation reported first-quarter 2022 earnings of $1.31 per share, rising 79% year over year and beating the Zacks Consensus Estimate by 12.93%.

Revenues of $241 million beat the Zacks Consensus Estimate by 4.7%. The top line grew 43% year over year.

Strong Fundamental Drivers

Onto Innovation is the leading manufacturer of avant-garde process control tools that perform macro defect inspections and metrology and lithography systems. The company was formed through a merger between Nanometrics Incorporated and Rudolph Technologies on Oct 25, 2019.

Onto Innovation is well-positioned to gain from the increased demand for semiconductors as industries worldwide are trying to automate their products and services.

On the last earnings call, management noted that the company signed agreements worth $390 million for inspection and metrology solutions across the front and back-end applications for 2022. This represents year-over-year growth of 40%.

The adoption of Iris cleaner film metrology is witnessing steady traction. The company has bagged several orders from the latest NAND customer. The company also announced the first shipment of the Dragonfly G3 system with the new EB40 module to a semiconductor manufacturer. The module has been pre-ordered by 11 customers. Integrating the Dragonfly G3 system with the EB40 module enables all-surface wafer inspection and provides a new algorithm for defect detection.

The global semiconductor market is set to reach $893.10 billion by 2029, at a CAGR of 9.2% between 2022 and 2029, per Fortune business insights.

Other Stocks to Consider

Some other top-ranked stocks from the broader technology space are InterDigital IDCC, Vishay Intertechnology VSH and Avnet AVT. InterDigital and Avnet currently sport a Zacks Rank #1, whereas Vishay Intertechnology holds a Zacks Rank #2.

The Zacks Consensus Estimate for InterDigital’s 2022 earnings is pegged at $3.28 per share, increasing 5.13% in the past 60 days. The long-term earnings growth rate is anticipated to be 15%.

InterDigital’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 141.13%. Shares of IDCC have declined 19% in the past year.

The Zacks Consensus Estimate for Vishay Intertechnology’s 2022 earnings is pegged at $2.68 per share, rising 10.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 22.7%.

Vishay Intertechnology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.96%. Shares of VSH have declined 16.7% in the past year.

The Zacks Consensus Estimate for Avnet’s fiscal 2022 earnings is pegged at $6.83 per share, rising 20.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 37.2%.

Avnet’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 21.22%. Shares of Avnet have grown 7.7% in the past year.


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