The risk of a war between China and Taiwan threatens U.S. stocks much more than the war in Ukraine, BofA said.
There is plenty to worry about if you’re investing in China — from deteriorating relations with the U.S., to supply-chain turmoil, to slowing economic growth.
Bank of America strategists raise another point. “Russia’s invasion of Ukraine may have increased the risk of a potential China-Taiwan conflict,” they wrote in a commentary.
“China-Taiwan poses a much bigger threat to the S&P 500 and global economy, given Taiwan’s role in supplying over 90% of the world’s advanced semiconductors.”
So BofA formed a list of the S&P 500 companies with the highest sales exposure to China and Taiwan.
Here are the top 10 on the list.
1. Wynn Resorts (WYNN) – Get Wynn Resorts Limited Report, a casino company. Revenue exposure to China: 70%.
2. Las Vegas Sands (LVS) – Get Las Vegas Sands Corp. Report, a casino company. Revenue exposure to China: 63%.
3. Qualcomm (QCOM) – Get QUALCOMM Incorporated Report, a semiconductor company. Revenue exposure to China: 60%.
4. Texas Instruments (TXN) – Get Texas Instruments Incorporated Report, a semiconductor company. Revenue exposure to China: 55%.
5. IPG Photonics (IPGP) – Get IPG Photonics Corporation Report, a laser maker. Revenue exposure to China: 42%.
6. Western Digital (WDC) – Get Western Digital Corporation Report, a data storage company. Revenue exposure to China: 40%.
7. NXP Semiconductors (NXPI) – Get NXP Semiconductors N.V. Report. Revenue exposure to China: 39%.
8. Qorvo (QRVO) – Get Qorvo Inc. Report, a semiconductor company. Revenue exposure to China: 34%.
9. Broadcom (AVGO) – Get Broadcom Inc. Report, a semiconductor company. Revenue exposure to China: 33%.
10. Corning (GLW) – Get Corning Incorporated Report, a ceramics company. Revenue exposure to China: 33%.
Morningstar’s Take on Wynn Resorts
Morningstar analyst Dan Wasiolek assigns the company a narrow moat and puts fair value for the stock at $104. It recently traded at $59.51.
“The Macao government continues to heavily regulate VIP play, elevating long-term operational risk,” he wrote in a commentary.
“Wynn has outsize exposure to the expected long-term shift away from VIP gaming revenue toward non-gaming and mass play. Still, we see an attractive long-term growth opportunity in Macao, with Wynn’s high-end iconic brand positioned to participate.”
Morningstar’s Take on Las Vegas Sands
Wasiolek gives this company a narrow moat too and puts fair value for the stock at $50. It recently traded at $34.51.
“Although the pandemic and government regulation continue to materially affect near-term demand in Macao (66% of estimated 2024 EBITDA), we still think Las Vegas Sands and the gaming enclave are well positioned for long-term growth,” he wrote in a commentary.
Morningstar’s Take on Qualcomm
Morningstar analyst Abhinav Davuluri assigns the company a narrow moat and puts fair value for the stock at $163. It recently traded at $131.60.
“We expect Qualcomm’s licensing business, the driver of the firm’s narrow moat rating, to continue generating solid cash flows, due to the ongoing ramp of 5G,” he wrote in a commentary.
“However, government investigations into the business model have increased the possibility of negative effects on royalty revenue.”
