Needham has increased the price target for Amkor (NASDAQ:AMKR) Technology (NASDAQ: AMKR) to $45 from the previous target of $40 while maintaining a Buy rating on the stock.
The semiconductor packaging and test services provider reported second-quarter earnings that surpassed consensus estimates but provided third-quarter guidance slightly below analyst expectations.
Amkor Technology 's recent financial results revealed a performance that exceeded market consensus, although the company's outlook for the third quarter was not as optimistic as expected. This was attributed to a misestimation of Amkor's gross margins (GMs) by its peers for the second half of the year. The company noted that the recovery in the automotive and industrial sectors, as well as in traditional servers, was not as strong as anticipated 90 days ago.
The company also reported a delay in its 2.5D technology ramp-up, which is comparable to the Chip-on-Wafer-on-Substrate (CoWoS) used for artificial intelligence (AI) chips. The delay, expected to be around one month, is due to supply constraints for High Bandwidth (NASDAQ:BAND) Memory (HBM), leading to a 1% deviation from the third-quarter revenue guidance.
Despite these challenges, Amkor Technology is optimistic about its full-year revenue from 2.5D technology, projecting it to quadruple year-over-year. Additionally, the company has announced plans to expand its 2.5D capacity in 2025.
Management has indicated that the production of high-end smartphones, laptops, and wearable devices, which are believed to be Apple (NASDAQ:AAPL) products, is on track to increase significantly in the second half of 2024.
Amkor reported a strong second-quarter performance, with revenues reaching $1.46 billion and earnings per share at $0.27. This marks a 7% sequential increase in revenue, primarily driven by the demand for advanced packaging used in premium smartphones and AI solutions. The company also announced an outlook for the third quarter, anticipating revenue of $1.835 billion.
Despite the flat expectations for the automotive and industrial markets, there is strong demand projected for high-performance computing and ARM-based PCs. The company also plans to capitalize on industry trends and expand its geographic presence.
InvestingPro Insights
Following Needham's price target increase for Amkor Technology (NASDAQ:AMKR), the InvestingPro platform offers further insights that may interest investors. Amkor's commitment to shareholder returns is evidenced by its four-year consecutive dividend increase, showcasing the company's financial stability and confidence in its future cash flows. Additionally, the company's stock has experienced significant volatility recently, with a sharp decline over the last week, which may present a buying opportunity for investors considering the stock's strong historical return performance, including a robust return over the past three months.
InvestingPro data reveals a market capitalization of $9.26 billion and a P/E ratio that stands at 24.79 for the last twelve months as of Q1 2024, reflecting investor expectations about the company's earnings potential. However, the revenue has decreased by 8.17% over the last twelve months, which may warrant attention from investors looking at top-line growth. Despite this, analysts have revised their earnings upwards for the upcoming period, indicating a potential rebound or adjustment in expectations.
Investors can delve deeper into Amkor's financial health and future prospects with additional InvestingPro Tips, which include analysis on the company's debt levels, gross profit margins, and profitability predictions for the year. There are 12 additional tips available on the InvestingPro platform for Amkor Technology, which can be accessed at https://www.investing.com/pro/AMKR. For those interested in a comprehensive investment tool, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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