Palantir a high-risk investment with ’a one-of-a-kind growth and margin model’
Tuesday, Needham maintained a Buy rating on shares of Amkor Technology (NASDAQ:AMKR) but reduced the price target to $34 from $45. The adjustment follows Amkor's announcement of solid third-quarter results but a significant reduction in their fourth-quarter outlook.
The new forecast suggests an 11% quarter-over-quarter decline in total revenue and a 23% drop in Communications revenue, which is notably sharper than the usual single-digit declines observed in a typical fourth quarter.
The analyst from Needham attributes the downturn to a likely decrease in high-end smartphone demand and an under-allocation of orders for the 2024 models. Despite the subdued forecast, the firm recognizes a silver lining in the strength of Amkor's Computing revenue, which is expected to persist into the fourth quarter. This optimism is believed to be driven by the ramp-up of 2.5D technology.
In response to the revised fourth-quarter outlook, Needham has also adjusted its 2025 estimates for Amkor Technology. The reduction in the price target to $34 reflects the recalibrated expectations for the company's performance in the upcoming year.
The firm's decision to maintain a Buy rating indicates a continued positive outlook on Amkor's stock despite the immediate challenges anticipated for the fourth quarter of 2024.
In other recent news, Amkor Technology reported its third-quarter earnings, with an earnings per share (EPS) of $0.49, which was in line with the FactSet consensus. However, the company's revenue of $1.86 billion marked a 27% sequential increase and a 2.2% year-over-year increase. Despite this, the company's EPS and outlook disappointed investors, leading to a decrease in investor confidence.
Amkor Technology has projected a fourth-quarter EPS of $0.36, 35% below the Street consensus. This is due to an anticipated steeper-than-usual seasonal decline in smartphone builds and market share losses. As a result, Goldman Sachs has lowered its EPS estimates for Amkor from 2024 to 2026 by an average of 10%, decreasing its 12-month price target for Amkor shares to $32.
Amkor Technology has maintained its full-year 2024 capital expenditure forecast at approximately $750 million. The company's gross margin for the third quarter was 14.6%, relatively flat compared to the previous quarter but down from 15.5% in the same period last year.
Goldman Sachs suggests that investors should look for early signs of sustained market share growth or improvements in the company's structural profitability before adopting a more positive outlook on Amkor Technology's stock.
InvestingPro Insights
Amkor Technology's recent performance and outlook align with several InvestingPro metrics and tips. The company's market cap stands at $7.28 billion, with a P/E ratio of 19.21, indicating moderate valuation levels. Despite the recent downward revision in outlook, InvestingPro Tips highlight that Amkor has raised its dividend for 4 consecutive years, showcasing a commitment to shareholder returns even in challenging times.
The company's revenue for the last twelve months as of Q2 2024 was $6.40 billion, with a revenue growth of -7.5% over the same period. This aligns with the analyst's concerns about the projected decline in fourth-quarter revenue. However, an InvestingPro Tip notes that Amkor is a prominent player in the Semiconductors & Semiconductor Equipment industry, suggesting potential for recovery as market conditions improve.
Investors should note that Amkor's stock price movements are quite volatile, as indicated by another InvestingPro Tip. This volatility is reflected in the recent price target adjustment by Needham and could present both risks and opportunities for investors.
For a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide valuable insights into Amkor's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.