Palantir a high-risk investment with ’a one-of-a-kind growth and margin model’
On Wednesday, KeyBanc Capital Markets analyst Steve Barger revised the price target for Amkor Technology (NASDAQ:AMKR) stock, reducing it to $27.00 from the previous $34.00. Despite the adjustment, the firm maintained its Overweight rating on the semiconductor service provider’s shares. The stock, currently trading at $21.74 with a market capitalization of $5.39 billion, has seen significant pressure recently, trading near its 52-week low of $21.59. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, with technical indicators suggesting oversold conditions.
The adjustment followed Amkor’s fourth-quarter results, guidance, and a cautious outlook for 2025, which led to a low double-digit decline in the company’s stock. Barger attributed the market’s reaction to a combination of factors including a temporary loss of a socket on the iOS platform, persistent softness and uncertainty in the automotive sector, and Amkor’s guidance for first-quarter gross margins to hit a historic low. The low margins are due to several factors: reduced utilization levels, the ramp-up of the Vietnam facility, and the current material percentage of cost of goods sold. InvestingPro data reveals the company’s current gross profit margin stands at 14.77%, while six analysts have recently revised their earnings expectations downward for the upcoming period.
For the full year, Amkor has guided for flat to low single-digit growth. The company’s Communications segment is expected to face weakness in the first half of the year, with a greater-than-seasonal contribution in the second half, leading to approximately flat year-over-year sales. In the Automotive segment, while Amkor anticipates mid-teen growth from its Advanced Packaging (NYSE:PKG) applications in 2025, the outlook for the majority of the mainstream auto business is less optimistic, with only mild growth expected.
The Computing and Consumer segments are similarly projected to experience mild growth. Barger suggests that the combination of the temporary socket loss, currently reduced visibility in 2.5D applications, and what is likely to be an eighth consecutive quarter of year-over-year decline in Automotive indicates conditions that resemble a trough in the market cycle. While acknowledging the low visibility and the need to reduce estimates, Barger believes the downward revisions are more related to timing rather than structural issues within the company.
In his comments, Barger stated, "While disappointing, we think these reductions are more timing-related than indicative of structural issues, and we maintain our OW rating." Despite the lowered price target and cautious outlook for 2025, KeyBanc’s stance indicates a belief in limited downside potential for Amkor Technology’s stock moving forward.
In other recent news, Amkor Technology’s Q4 earnings exceeded analyst expectations, reporting an adjusted earnings per share of $0.43, surpassing the estimate of $0.38. However, the company’s revenue for the same quarter was $1.63 billion, slightly below the estimated $1.66 billion and down 7% YoY. Despite this, the company’s guidance for Q1 2025 fell short of expectations, forecasting earnings per share between $0.01 and $0.17, significantly below the consensus of $0.31.
Recent developments include DA Davidson reiterating its Buy rating on Amkor Technology, maintaining a steady price target of $36.00. The firm’s endorsement comes despite the semiconductor service provider’s Q1 outlook not meeting Wall Street expectations. DA Davidson anticipates that Amkor Technology will regain the lost iPhone socket in the second half of 2025, contributing to the company’s growth.
On the other hand, UBS revised its price target for Amkor Technology, reducing it to $27.65 from $32.50, while maintaining a Neutral rating. UBS analyst Haas Liu expressed concerns about the risks to Amkor’s sales guidance, anticipating a 2% YoY decline in sales. The firm’s analysis suggests that the necessary recovery in the latter half of 2025 may pose challenges for Amkor Technology’s financial performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.