KeyBanc cuts Amkor stock rating on demand visibility concerns

On Thursday, KeyBanc Capital Markets adjusted its stance on Amkor Technology (NASDAQ:AMKR) shares, downgrading the semiconductor packaging and test services provider from Overweight to Sector Weight. The downgrade comes as the stock has declined over 46% in the past six months, though InvestingPro analysis suggests the stock may be undervalued at current levels. The downgrade arises from concerns about the company’s exposure to demand fluctuations in its major end markets, including mobile phones, automobiles, and consumer products.

KeyBanc analysts noted the downgrade was prompted by the reduced visibility into demand, which is affected by changing trade policies. These uncertainties are expected to intensify the gross margin pressure Amkor is already anticipating in the first half of 2025 due to a temporary loss of a socket in its Mobile end market. According to InvestingPro data, the company’s gross profit margin stands at 14.77%, confirming these margin challenges. The analysts expressed concerns about Amkor’s business model, which they described as having inherently lower visibility and relatively high capital expenditures, though it’s worth noting that the company maintains a strong balance sheet with more cash than debt.

The analysts further elaborated that Amkor’s automotive sales typically follow the trends of major automotive semiconductor companies. While there is an expectation of a return to growth in the second half of 2025 based on consensus estimates, they believe that the company’s commentary, coupled with the volatile global trade environment, suggests a more cautious approach to the stock in the near term.

The report also highlighted that the company’s performance is likely to remain constrained until there is a clear indication of stabilization and growth in key end markets like Automotive and Mobile. Investors are advised to watch for signs of market recovery, which could potentially alleviate the current pressures on Amkor’s stock.

In conclusion, KeyBanc’s revised rating reflects a wait-and-see attitude towards Amkor Technology, as the market awaits signals of consistent demand and market stabilization that could support the company’s financial performance moving forward.

In other recent news, Amkor Technology reported fourth-quarter earnings that exceeded analyst expectations, with an adjusted earnings per share of $0.43 compared to the estimated $0.38. However, revenue for the quarter fell short, coming in at $1.63 billion against the expected $1.66 billion, marking a 7% year-over-year decline. The company’s guidance for the first quarter of 2025 also disappointed, forecasting earnings per share between $0.01 and $0.17, below the consensus of $0.31, and projecting revenue between $1.225 billion and $1.325 billion, lower than the anticipated $1.464 billion.

KeyBanc Capital Markets revised its price target for Amkor to $27 from $34, maintaining an Overweight rating, citing factors like a temporary loss of a socket on the iOS platform and low gross margins due to reduced utilization levels. DA Davidson, on the other hand, reiterated a Buy rating with a $36 price target, expressing optimism about Amkor’s potential to regain lost business and introduce next-generation graphics chip packaging. UBS also adjusted its price target to $27.65 from $32.50, maintaining a Neutral rating, and noted potential challenges for Amkor in achieving a flat sales performance for 2025 without a strong recovery in the second half of the year.

Despite these challenges, Amkor highlighted positive developments such as the ramp-up of its Vietnam facility and securing CHIPS funding to enhance U.S. manufacturing. The company’s board approved a 5% increase in the quarterly cash dividend and a special cash dividend, paid in December 2024.

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