Tuesday, B.Riley maintained a Buy rating on Amkor Technology (NASDAQ:AMKR) and raised the stock price target to $45 from $43, following the company's first-quarter earnings which surpassed consensus estimates. The upgraded target reflects a positive outlook based on the launch of a new 2.5D artificial intelligence (AI) packaging program and anticipated growth in the second half of the year.
Amkor Technology reported strong first-quarter results after the market closed on Monday, with performance exceeding expectations even before accounting for a one-time gain in gross margin. The company's second-quarter guidance was also higher than anticipated, signaling the start of a new 2.5D AI packaging program.
Looking further ahead, a robust over 30% ramp-up is expected in the second half of the year, driven by new AI and wearables programs, secular industry tailwinds, and positive seasonal trends in communications.
Despite a slight year-to-date decline in automotive sales, Amkor remains optimistic about growth in this segment, with the weakest point of the cycle now behind them as of the first quarter. The compute sector surprised with higher results in the first quarter, bolstered by better memory sales, ARM-based PCs, and initial shipments for the 2.5D AI program.
Although communications fell short of expectations in the first quarter, a significant third-quarter increase is projected, with levels expected to be well above the new model. In the consumer sector, a new wearables program is slated to complement a significant expansion in compute/high-performance computing (HPC) 2.5D packaging later in the year.
The firm notes that Amkor's cost of goods sold (COGS), expense management, and cash generation are on track. Moreover, geographical diversification is expected to provide strong intermediate-to-long-term global re-shoring tailwinds, potentially becoming more material in late 2024 and beyond.
With the new calendar year 2024 earnings per share (EPS) estimates rising by 7% and the calendar year 2025 remaining flat, Amkor's shares are seen as having the potential to appreciate beyond the new price target over the next 12 months.
The stock is currently trading at a modest 13.3 times forward two-year price-to-earnings (P/E) ratio, which is 10 percentage points below the 14-year range midpoint, despite factory under-utilization challenges compared to the SOX index's 23.5 times P/E at the 65th percentile.
Investors interested in Amkor Technology can look forward to the company's participation in B. Riley's Annual Conference on May 22nd and 23rd, where further insights into the company's prospects may be shared.
InvestingPro Insights
Following the positive outlook from B.Riley on Amkor Technology (NASDAQ:AMKR), current data from InvestingPro underscores some of the financial nuances that investors may consider. The company boasts a market capitalization of $7.75 billion, with a Price/Earnings (P/E) ratio that has adjusted to 20.75 over the last twelve months as of Q1 2024.
This valuation metric suggests a fair level of investor confidence in the company's earnings capacity. Despite a slight decline in revenue growth, down 8.17% over the last twelve months as of Q1 2024, Amkor has maintained a Gross Profit Margin of 14.86%, indicating its ability to manage cost of goods sold effectively.
From the perspective of liquidity and financial health, Amkor's liquid assets surpassing short-term obligations is a reassuring sign for stakeholders. This aligns with the firm's note on Amkor's effective expense management and cash generation.
Moreover, the company's commitment to shareholder returns is reflected in its dividend growth, with a yield of 1.0% and a 5.0% increase in the last twelve months as of Q1 2024. Notably, Amkor has raised its dividend for 4 consecutive years, an InvestingPro Tip that highlights the company's consistent approach to capital distribution.
Investors considering Amkor Technology can also take advantage of additional insights available on InvestingPro. There are more InvestingPro Tips that can help further evaluate the company's performance and potential, including its position as a prominent player in the Semiconductors & Semiconductor Equipment industry and its moderate level of debt.
For those looking for a deeper dive into Amkor's financials and to access these additional tips, InvestingPro offers a wealth of information. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing you with even more valuable data for your investment decisions.
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