On Tuesday, UBS analyst Sunny Lin raised the rating for ASE Technology Holding Co (NYSE:ASX) Ltd. (3711:TT) (NYSE: ASX) from Neutral to Buy, and increased the price target from NT$170.00 to NT$200.00. The upgrade reflects a positive outlook based on anticipated sales growth and earnings per share (EPS) increases for the company in the coming years.
The analyst's optimism for ASE Technology is based on several key factors. Firstly, there is an expected 19% sales growth in 2025, with EPS rising from NT$7.0 in 2024 to NT$13.4 in 2025. A cyclical restocking of consumer semiconductors partly supports this projection.
Furthermore, advanced packaging technologies are expected to structurally boost the growth and valuation of leading backend suppliers like ASE. UBS estimates that ASE will expand its advanced packaging sales to US$1.4 billion in 2025, which would surpass the company's guidance of US$1 billion.
The analyst also suggests that if edge AI technology drives a stronger upgrade cycle in 2025, Apple (NASDAQ:AAPL) could potentially become a significant customer for ASE, contributing over 20% of its sales. This relationship would be a substantial factor in ASE's revenue growth.
The new price target of NT$200 is based on a 15x multiple of the company's projected 2025 earnings. This valuation reflects the analyst's confidence in ASE's potential to grow its sales and earnings significantly over the next few years.
In other recent news, Generation Development Group is expected to see a 29% EPS growth, according to Jefferies. The firm has assigned a Buy rating to the company, emphasizing its focus on revenue streams buoyed by regulatory and structural tailwinds.
Jefferies also highlighted the company's impressive forecast for adjusted earnings per share (EPS), which is expected to grow at a compound annual growth rate (CAGR) of 29% throughout the forecast period.
Simultaneously, ASE Technology Holdings reported mixed results for Q2 of 2024. The company's fully diluted EPS was NTD 1.75, and basic EPS was NTD 1.80. Consolidated net revenues grew 6% sequentially and 3% year-over-year, with gross profit reaching NTD 23.1 billion and a gross margin of 16.4%.
ASE Technology plans to expand its advanced packaging business and manage costs amid a cautious outlook for its traditional business. The company also plans to double its CapEx investment in 2024, focusing on assembly, testing, materials, and EMS. These are the recent developments for both companies.
InvestingPro Insights
Adding to UBS analyst Sunny Lin's optimistic outlook for ASE Technology Holding Co Ltd. (NYSE: ASX), recent data from InvestingPro provides further context to the company's financial position and market performance.
ASX currently boasts a market capitalization of $21.28 billion, reflecting its significant presence in the Semiconductors & Semiconductor Equipment industry. The company's P/E ratio stands at 21.53, suggesting that investors are willing to pay a premium for its earnings, possibly due to growth expectations aligned with the analyst's projections.
InvestingPro Tips highlight ASX's consistent dividend performance, having maintained dividend payments for 7 consecutive years and raised them for 3 consecutive years. This track record of steady shareholder returns complements the growth narrative presented in the article. Additionally, ASX has demonstrated strong returns over the last five years, which aligns with the positive long-term outlook described by the UBS analyst.
The company's revenue for the last twelve months as of Q2 2024 was $18.07 billion, with a gross profit margin of 16.1%. While the revenue growth for the same period showed a decline of 7.17%, the quarterly revenue growth for Q2 2024 was positive at 2.91%, potentially indicating a turnaround that supports the analyst's expectations for future growth.
For investors seeking more comprehensive insights, InvestingPro offers 6 additional tips for ASX, providing a deeper understanding of the company's potential and risks.
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