GlobalFoundries Inc. rolls into its first earnings report as a public company trying to capitalize on its servicing of non-cutting edge chip designs amid a global semiconductor supply crunch.
After the market closes, GlobalFoundries GFS is scheduled to report quarterly earnings on Tuesday. In October, the Malta, N.Y.-based silicon wafer foundry, known as a fabrication plant, or fab, debuted its stock on the Nasdaq. Wall Street analysts just started coverage of the stock last week.
GlobalFoundries CEO on IPO: We need to speed up our capacity Third-party fabs like GlobalFoundries make silicon wafers for a majority of chip makers that don't have their own fabs - companies like Apple Inc. AAPL and Nvidia Corp. NVDA. GlobalFoundries is the third largest foundry in the world based on external sales.
While the world is still working its way through a global chip shortage and fabs still have long back orders from customers, one of the standout aspects of GlobalFoundries is that it services chip makers that are not considered cutting edge but essential all the same, as evidenced by shortages of inexpensive chips that are crucial for the production of autos.
For record price increases for computers: The tiny, $1 chip that is behind record-price increases.
GlobalFoundries carved out a niche in the fast-growing foundry market by focusing on older, trailing-edge technology that has been neglected by Taiwan Semiconductor Manufacturing Co. TSM, Citi Research analyst Christopher Danley, who has a buy rating and a $75 price target, wrote in a note about the company.
He said that GlobalFoundries has proprietary wireless technology that has resulted in strong share gains with leading wireless companies such as Qualcomm QCOM, Broadcom AVGO, and Qorvo QRVO.
Citi s Danley sees GlobalFoundries as a major beneficiary of the industry's shortages. Earnings: Of six analysts surveyed by FactSet, GlobalFoundries is expected to have a loss of a penny a share. A month ago, Thomas Caulfield, GlobalFoundries chief executive, predicted a profit of $290 million to $300 million for the September-ending quarter. The Street expects to have a loss of $19.9 million, according to the seven analysts polled by FactSet.
According to nine analysts, Wall Street expects to generate revenue of $1.7 billion from GlobalFoundries. Caulfield predicted revenue of about 1.7 billion.
Stocks movement: Since the company s trading debut on October 28, shares have gone up 50% from their $47 IPO pricing. Over the same period, the Renaissance has declined 5%, the PHLX Semiconductor Index SOX has risen 13%, the S&P 500 Index SPX has advanced 2%, and the tech-heavy Nasdaq Composite Index COMP has gone up 2%.
What analysts are saying is true.
Jefferies analyst Mark Lipacis, who has a buy rating and a $87 price target, also touched on GlobalFoundries focus on practical chips.
He called Fab the leading trailing-node analog mixed-signal foundry, benefiting from the IoT demand drivers that will translate to unit demand 10 x the size of cellphones, and a shift of its customers to a fab-lite model. The dynamics have led to unprecedented levels of visibility and pricing power, and we expect GFS to maintain a premium valuation multiple, Lipacis said.
The analyst notes that the capacity of the fab is sold out for 2022, 94% sold out for 2023 and roughly 77% of their 2022 and 2023 sales approx. A long-term agreement will secure $10 billion. Five things to know about GlobalFoundries:
Cowen analyst Krish Sankar, who has an outperform rating and $80 price target, said GlobalFoundries strong backlog of single-source designs could double the company's gross margins through 2025 and drive a 40% earnings-per-share compound annual growth rate.
Sankar said that as a U.S. DoD Trusted Foundry, a large presence in the U.S. EU and Singapore, it offers geographic diversity and makes it a unique play on global ex-Greater China tech investment themes.
13 of the 16 analysts who have just recently initiated coverage have buy ratings, two have hold ratings and one has a sell rating, according to FactSet. According to FactSet data, analysts have an average target price of $77.41.