On Monday, CLSA initiated coverage on Alchip Technologies Ltd (3661:TT) stock, a semiconductor company, with an Outperform rating and a price target of NT$2,900. The firm's decision comes despite a significant drop in Alchip's share price, which has fallen 58% from its peak due to growing concerns about the company's growth prospects in the coming year.
Alchip is anticipated to experience a sales decline of 14% in 2025, attributed to Intel’s Habana Labs revising its sales forecasts downward. However, CLSA predicts a rebound in 2026, with the ramping up of new projects. The firm views the current downturn in Intel’s sales as an opportunity for investors to enter at a reset expectation level.
The firm maintains a positive outlook on Alchip's long-term prospects, citing the company's involvement in AI ASICs and its partnership with Amazon (NASDAQ:AMZN) as unchanged and pivotal drivers for future growth. CLSA forecasts a compound annual growth rate (CAGR) of 29% in Alchip's earnings per share (EPS) for the period from 2024 to 2026.
The Outperform rating and the NT$2,900 price target are based on a 30x multiple of the company's projected earnings from the third quarter of 2025 to the second quarter of 2026. CLSA’s coverage initiation reflects confidence in Alchip's ability to overcome short-term challenges and capitalize on its strategic initiatives in the semiconductor industry.
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