Amkor Technology's Sell-Off Offers Investors A Strong Buying Opportunity

seekingalpha08-04

Amkor Technology reported strong results but provided softer-than-expected guidance for Q3’24, leading to a significant sell-off in shares.Amkor's operational performance in segments like automotive ...

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Opportunity\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-04 21:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4710214-amkor-technologys-sell-off-offers-investors-a-strong-buying-opportunity><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Amkor Technology reported strong results but provided softer-than-expected guidance for Q3’24, leading to a significant sell-off in shares.Amkor's operational performance in segments like automotive ...</p>\n\n<a href=\"https://seekingalpha.com/article/4710214-amkor-technologys-sell-off-offers-investors-a-strong-buying-opportunity\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4515","symbol_name":"5G概念","start_time":0,"source_url":"https://seekingalpha.com/article/4710214-amkor-technologys-sell-off-offers-investors-a-strong-buying-opportunity","article_id":"2456688732","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/556415421/image_556415421.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2456688732","pubTimestamp":1722776400,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Amkor Technology reported strong results but provided softer-than-expected guidance for Q3’24, leading to a significant sell-off in shares.Amkor's operational performance in segments like automotive 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Monty RakusenAmkor Technology Overview Amkor Technology (NASDAQ:AMKR) reported q2’24 earnings on July 29, 2024, with relatively strong results paired with softer-than-expected eq3’24 guidance. On the call, management guided q3’24 revenue at $1.835b at the midpoint, up 26% sequentially, with growth driven by advanced packaging. This figure falls at the low end of analysts’ estimates of $1.835-1.951b for the September quarter, suggesting that management’s expectations for the OSAT market will be relatively flat when compared to q3’23. Amkor experienced significant selling pressure post-q2’24 earnings, dropping -18% immediately following the earnings release and have continued their decline, resulting in a -24% decline. I believe this sell-off is widely overstated and should open up a strong buying opportunity for investors looking at AMKR shares for their long-term potential as one of the largest contract OSAT companies outside of China. I recommend AMKR shares with a BUY rating with a price target of $37.62 at 6.54x eFY25 EV/EBITDA.   FinChatAmkor Operations   Corporate ReportsAmkor is finding itself in the middle of a challenging market as the industry attempts to find direction. Given Amkor’s positioning in the supply chain, I believe Amkor’s operational performance can be a telling sign for the direction of the broader semiconductor and end markets. Management at Amkor voiced a slower-than-expected recovery in the automotive node, suggesting that the intermediates are still undergoing their destocking phase. This verbiage goes contrary to what management at Qualcomm (QCOM) voiced as the firm experiences growth in their automotive segment. This could be suggestive that Qualcomm’s performance in their automotive segment is the result of stocking up inventory levels before experiencing a slowdown in new orders, a datapoint that Amkor’s results suggest. Given the latency, Amkor may realize a return to growth in the segment in eFY25 as OEMs turn to building back newer inventories. Despite the near-term headwinds in the segment, Amkor has a large opportunity ahead within the segment as more content is added to each new model vehicle. Growth drivers within the automotive segment include fleet electrification, ADAS, infotainment, and telematics. Vehicles may also include a certain amount of communications chips as more professional fleets are connected to the cloud for real-time data transmission for fuel tracking, GPS, and preemptive repairs. Amkor’s communications segment experienced 17% year-over-year growth in q2’24, which was likely the result of a ramp up of new chips for the next iPhone release. Management mentioned the sluggish start to 2024 in the android market, which resulted in a slight sequential decline. As outlined in my investment thesis covering other firms in the industry, I anticipate the consumer side of the tech industry to experience significant headwinds through the end of CY24-25 as consumers remain constrained by elevated inflationary pressures. Given the comparable breadth of Dell Technologies’ (DELL) products, I believe this thesis still stands to a certain degree with the majority of differences being the positioning in the value chain. Given that Amkor is at the end of the semiconductor manufacturing process, just before reaching firms like Dell Technologies, I believe Amkor experiences the push and pull of supply & demand at different points in time when compared to companies like Dell. Given this factor, I anticipate Amkor’s initial success in handheld devices may not last throughout the duration of eFY24 as the firm has already undergone their part in production ramp-up. My theory on this also applies to AI PCs as Amkor’s OSAT services have been utilized for the initial ramp of AI PCs in the midst of a soft consumer market. Given the budgetary constraints for discretionary spending by consumers, I anticipate a soft market for the next generation of smartphones and PCs net of any replacements or refreshes. In terms of enterprise infrastructure investments, management at Dell and Hewlett Packard Enterprise (HPE) have suggested that general compute servers are at the beginning of the next refresh cycle. I anticipate this will roll into Amkor’s revenue stream by eq4’24 and potentially strengthen in eFY25 as we move deeper into the refresh cycle.   Corporate ReportsLooking to financials, I forecast Amkor to report modest growth in the last two quarters of eFY24 with growth rates of 3% and 8% for eq3’24 and eq4’24, respectively. I believe eq3’24 and eq4’24 will be the beginning of the ramp-up of production for wearables. I also expect eq4’24 to be the beginning of the ramp-up for their computing segment as CPUs ramp up for the next refresh cycle and accelerate in eFY25 to 83% growth. My forecast for eFY25 calls for a softening consumer market, which will result in a -23% decline in revenue. This will be offset by strength in the automotive segment as inventory destocking nears the end and the next ramp-up of advanced semiconductors comes into play. I believe Qualcomm’s optimism plays as a strong signal for the ramp-up for automotive-related chips. Given that Amkor’s utilization rate is currently in the low-70s with an anticipated ramp-up in q3’24, I believe the firm will realize stronger margins as a result of scaled production. I believe this will improve going into eFY25 as the firm has more customers turn to 2.5D packaging for advanced nodes. In addition to this, Amkor may realize a ramp-up in high bandwidth memory chips in eFY25 as customers, such as Micron Technology (MU), ramp up production. I believe these factors will turn their declining EBITDA margin from a depressed 17% in FY23 and eFY24 back up to 19% in eFY25. AMKR Stock Valuation & Shareholder Value   Corporate ReportsAMKR shares experienced a sharp sell-off post-earnings on July 30, 2024, with continued downward pressure as the AI market took a turn. Though much of the sell-off was justified given management’s modest guidance for eq3’24, I believe this short-sighted reaction will allow for new money to flow into AMKR shares as the growth trajectory looks more appealing a year out. Looking at AMKR’s historical valuation, the sell-off has only moved the firm’s price back down to its historical trading norms.   Seeking AlphaUsing my eFY25 forecast, I believe AMKR shares should be priced at $37.62/share for an EV/EBITDA multiple of 6.54x. Given the recent sell-off and optimistic outlook in data center and automotive, I believe investors should consider buying AMKR shares as the price declines. If anything, this has only made AMKR shares appear more appealing, given that investors are willing to push the company’s valuation to new highs of near 10x EV/EBITDA. I recommend AMKR shares with a BUY rating.   Corporate Reports Looking at AMKR shares from a technical perspective, I believe shares may continue to sell off towards $26/share before completing the retracement process. I believe the price decline will allow for investors to average into a position before the firm realizes its CPU catalyst in late-eFY24-25.   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