GlobalFoundries’ first earnings report is expected to show strength in lower-tech chip designs

Third-party wafers like GlobalFoundries make silicon wafers for the majority of chipmakers that don’t have their own insoles – companies like Apple Inc.
AAPL,
+ 2.19%

and Nvidia Corp.
NVDA,
+ 5.95%,
Eg. GlobalFoundries claims to be the third largest foundry in the world based on outside sales.

While the world is still struggling to overcome the global chip shortage and factories still have orders from customers long ago, one of the outstanding aspects of GlobalFoundries is that it provides services to manufacturers. Chipmaking isn’t considered cutting-edge but is all necessary, as evidenced by the lack of inexpensive chips that are so vital to the production of cars.

For more: Tiny $1 chip is behind record price hike for computers

“GlobalFoundries has created a niche in the fast-growing foundry market by focusing on older, advanced technology that has been neglected by [Taiwan Semiconductor Manufacturing Co.
TSM,
+1.87%
], the largest mint,” Citi Research analyst Christopher Danley, who has a buy rating and $75 price target, wrote in a note about the company.

“In addition, GlobalFoundries has proprietary wireless technology that has yielded highly profitable market share with leading wireless companies such as Qualcomm
QCOM,
+ 4.55%,
Broadcom
AVGO,
+ 3.25%,
and Qorvo
QRVO,
+ 1.84%,
“I said.

Citi’s Danley also sees GlobalFoundries as “a major beneficiary of the shortage across the industry.”

What to expect

Income: Of the six analysts surveyed by FactSet, GlobalFoundries on average expected a loss of one cent a share. One month ago, Thomas Caulfield, chief executive officer of GlobalFoundries, forecast profits of about $290 million to $300 million for the last quarter of September. Of the seven analysts polled by FactSet, Street expected a loss of 19.9 millions of dollars.

Revenue: Wall Street expects $1.7 billion in revenue from GlobalFoundries, according to nine analysts polled by FactSet. Caulfield forecasts revenue of about $1.7 billion.

Ancient movement: Since the company launched for trading on October 28, shares are up 50% from their $47 IPO price. During the same period, the Renaissance IPO ETF
IPOs,
+ 0.59%

fell 5%, PHLX Semiconductor Index
NUMBER X,
+ 4.08%

rose 13%, the S&P 500
SPX,
+ 1.32%

rallied 2% and the tech-heavy Nasdaq Composite Index
COMP,
+ 1.88%

has increased 2%.

What are analysts saying?

Jefferies analyst Mark Lipacis, who has a buy rating and $87 price target, also mentioned GlobalFoundries’ focus on more practical chips.

He calls fab a “leading analog/mixed-signal foundry to benefit from IoT demand drivers that will translate into 10x mobile-size unit demand and customer conversion.” to fab-lite model”.

“These dynamics have resulted in unprecedented levels of visibility and pricing power, and as such, we expect GFS to maintain a premium valuation multiple,” Lipacis said.

The analyst noted that the fab’s capacity “was sold out in 2022, 94% sold out in 2023, and about 77% of sales in 2022 and 2023 (about $10 billion) are secured by deals.” long-term.”

For more: Five things to know about GlobalFoundries

Cowen analyst Krish Sankar, who has better ratings and a $80 price target, says GlobalFoundries has a backlog of multiple single-source designs that could double the company’s gross margin through 2025 and driving a compound annual earnings per share growth rate of 40%.

Sankar added: “As a US DoD Trusted Facility, the large presence in the US, EU and Singapore brings geographical diversity and makes it a unique game. on global technology investment topics (excluding Mainland China).

Of the 16 analysts that recently started reporting, 13 have a buy rating, two hold a rating and one have a sell rating, according to FactSet. Among them, analysts have an average price target of $77.41, according to FactSet data.