indie Semiconductor: Back On Track

seekingalpha2024-11-24

indie Semiconductor faced a tough 2024 but is poised for significant growth in 2025 and beyond, driven by EVs and AVs.The company has a strategic backlog of $7.1 billion, focusing on vision and radar ...

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The sector was highly reliant on EVs and AVs for growth, and neither segment has progressed much over the last year. My investment thesis is ultra Bullish on the stock, with the company back on track for a big 2025 and beyond. Source: Finviz Tough Year indie Semiconductor recently reported that Q3 revenues tumbled by nearly 11% to only $54 million. The company spent the prior couple of years growing at clips in excess of 100% due to a combination of huge organic growth and acquisitions. As with a lot of auto tech companies, indie Semiconductor has been hit with pressure on the sector as premium vehicles with extra content ran into headwinds in 2024. The ultimate investment story really hasn't changed much, with modern vehicles having far more silicon content from cameras to radar to lidar to electrification versus legacy vehicles. Average vehicle content is forecast to reach $1,000 in 2024 and jump to $1,400 in 2029. The key here is that EVs and premium vehicles have 2x to 4x the average content, with vehicles from Rivian (RIVN) and Lucid (LCID) estimated to have more than $6K in sensor content alone. Source: indie Semi. Q3'24 presentation  The roadblocks the auto sector hit this year will eventually be bypassed. The sector will return to solid growth as the market shifts to EVs and self-driving vehicles. In the process, indie Semiconductor has massively expanded the strategic backlog to $7.1 billion. The company has grown the backlog from $6.3 billion last year for 12% growth, as the industry plans for the ultimate transition. Source: indie Semi. Q3'24 presentation  The company is targeted mostly at vision and radar, accounting for 72% of the backlog. The focus remains solidly on advanced ADAS, in-cabin experience and electrification. In the meantime, indie Semiconductor has improved the financials, with the quarterly loss narrowed to only $17 million. The company now has a non-GAAP gross margin topping 50% with a goal of reaching breakeven next year at quarterly revenues of $80 million. Management forecasts being cash flow position in 2025. The plan is for substantial growth next year with the strategic backlog converting into solid revenue growth, but indie Semiconductor still won't make much of a dent on the backlog balance. Seeing The Opportunity Mature The stock is worth about $900 million now, and the real question is whether true value lies when indie Semiconductor is reporting weak numbers in 2024. If the company continues reporting an annual revenue pace of $220 million, the stock probably ticks lower in 2025. If management is correct and ADAS related sales start ramping next year, the stock could end 2025 far higher. indie Semiconductor guided to a couple of key revenue targets in the Q3'24 earnings call. The company guided to Q4 sales of $58 million at the midpoint, with a long-term goal of $700 million in annual sales in 2028. The other key financial target more impactful on the stock was confirmation of 2025 revenues hitting consensus analyst estimates. Accordingly, the target is for 2025 sales to surge over 40% to top $300 million. Source: Seeking Alpha  indie Semiconductor hitting these financial targets will play a couple of crucial roles beyond the stock being attractive at only 3x sales. The biggest issue is that the auto tech company is forecast to reach $80 million in quarterly sales in Q3'25, a number where the company expects to break even and to eliminate the need to raise additional capital. The other key is indie Semiconductor proving out the ramp in vision and radar sales in 2025, improving confidence in the strategic backlog value. The applicable stock value would get a lot more focus from the market. At the end of the day, an auto tech semiconductor stock with 40% growth can easily trade at 10x forward sales. By mid-2025, indie Semiconductor could start trading at 10x the 2026 revenue target of $450 for a $4.5 billion market cap. Ambarella (AMBA) is a prime example of a semiconductor stock in the vision segment, trading at nearly 10x forward sales. Not to mention, this company has reported flat sales going back to pre-Covid and the consensus estimates only have Ambarella growing around a 20% rate, not 40%. Data by YCharts The stock valuation could reach 4x to 5x higher than the current stock price at $5. Of course, the assumption is that indie Semiconductor doesn't raise any additional funds via the ATM after adding $10+ million in Q3. The biggest risk to the investment story is a cash crunch from the story not playing out as forecast. indie Semiconductor only has ~$100 million in cash with $158 million in debt, so a few quarters of cash burn at the Q3 rate along with no progress in growing revenues would lead the BoD to seeking new capital. Takeaway The key investor takeaway is that indie Semiconductor appears back on track. The auto tech company forecasts strong growth next year, with an ultimate plan of growing more than 3x by 2028.  Investors should use the current price to load up on a leader in tech for modern EV and self-driving cars.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.30.2","shortVersion":"4.30.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485964227"}