Core Viewpoint - Amkor Technology (AMKR) has experienced a significant decline in share price, losing 17.7% over the past three months, underperforming both the Zacks Electronics - Semiconductors industry and the S&P 500 index [1] Group 1: Financial Performance - AMKR reported challenges in supply chain disruptions due to geopolitical tensions and macroeconomic issues such as high inflation and interest rates, which have constrained both top and bottom lines [1] - The company anticipates third-quarter fiscal 2024 revenues to be between $1.785 billion and $1.885 billion, with a consensus estimate of $1.84 billion, while the fiscal 2024 revenue estimate stands at $6.51 billion, reflecting a year-over-year improvement of 0.15% [6] Group 2: Market Challenges - Amkor is facing lower demand for its 2.5D integrated circuits due to inventory corrections in the automotive and industrial markets, alongside rising operating expenses from the construction of a new factory in Vietnam [2] - The company is experiencing a slow recovery in the automotive and industrial sectors, as well as a decline in demand from traditional data center clients, leading to underutilization of its factories [1] Group 3: Competitive Landscape - Amkor is a key player in the OSAT market, partnering with major tech companies like Apple, Qualcomm, and Intel, but faces stiff competition from Taiwan Semiconductor Manufacturing Company (TSM) and ASE Technology Holding (ASX) [4][5] - TSM focuses on chip manufacturing with a strong advanced packaging division, while ASX specializes in IC packaging, testing, and assembly services [5]

Group 1 - Amkor Technology (AMKR) closed at $30.36, down 0.99% from the previous trading day, underperforming the S&P 500's gain of 0.13% [1] - The stock has decreased by 5.84% over the past month, while the Computer and Technology sector gained 1.56% and the S&P 500 increased by 3.67% [1] - The upcoming earnings report is expected to show an EPS of $0.50, a 7.41% decline year-over-year, with projected revenue of $1.84 billion, up 0.78% from the previous year [1] Group 2 - Full-year Zacks Consensus Estimates predict earnings of $1.54 per share and revenue of $6.51 billion, reflecting year-over-year increases of 5.48% and 0.15% respectively [2] - Recent changes in analyst estimates indicate a shifting business landscape, with upward revisions suggesting analysts' positive outlook on the company's operations [2] Group 3 - Amkor Technology currently holds a Zacks Rank of 5 (Strong Sell), with the Zacks Consensus EPS estimate remaining unchanged over the last 30 days [3] - The company is trading at a Forward P/E ratio of 19.97, which is lower than the industry's Forward P/E of 28.24, indicating a valuation discount [3] - The Electronics - Semiconductors industry, part of the Computer and Technology sector, has a Zacks Industry Rank of 134, placing it in the bottom 48% of over 250 industries [3]

Core Viewpoint - Three stocks have been added to the Zacks Rank 5 (Strong Sell) List, indicating a significant downward revision in earnings estimates for these companies [1] Company Summaries - **Carter Bankshares (CARE)**: A bank holding company offering various financial services. The Zacks Consensus Estimate for its current year earnings has been revised downward by 68.8% over the last 60 days [1] - **Amkor Technology (AMKR)**: The largest independent provider of semiconductor packaging and test services globally. The Zacks Consensus Estimate for its current year earnings has been revised downward by 12.5% over the last 60 days [1] - **Caleres (CAL)**: A footwear retailer and wholesaler. The Zacks Consensus Estimate for its current year earnings has been revised downward by almost 8.2% over the last 60 days [1]

Company Performance - Amkor Technology (AMKR) closed at $28.84, reflecting a +0.56% change from the previous day, outperforming the S&P 500's gain of 0.45% [1] - The stock has decreased by 8.78% over the past month, underperforming the Computer and Technology sector's loss of 0.98% and the S&P 500's gain of 2.54% [1] - The upcoming earnings report is expected to show an EPS of $0.50, a decline of 7.41% year-over-year, with revenue projected at $1.84 billion, an increase of 0.78% from the prior-year quarter [1] Annual Forecast - Zacks Consensus Estimates predict earnings of $1.54 per share and revenue of $6.51 billion for the year, representing changes of +5.48% and +0.15% respectively compared to the previous year [2] - Recent revisions to analyst forecasts for Amkor Technology are crucial as they reflect the changing nature of near-term business trends, with positive revisions indicating a favorable business outlook [2] Valuation and Ranking - Amkor Technology has a Zacks Rank of 4 (Sell), with the consensus EPS projection remaining unchanged over the past 30 days [3] - The company is currently trading at a Forward P/E ratio of 18.68, which is a discount compared to the industry average Forward P/E of 28.7 [3] - The Electronics - Semiconductors industry, part of the Computer and Technology sector, holds a Zacks Industry Rank of 96, placing it in the top 38% of over 250 industries [3]

Group 1 - Amkor Technology (AMKR) is the world's largest independent provider of semiconductor packaging and test services, with a current year earnings estimate revised 13.5% downward over the last 60 days [1] - BioTechne Corp (TECH) is a global life sciences company that develops, manufactures, and sells biotechnology products and clinical diagnostic controls, with a current year earnings estimate revised almost 9.7% downward over the last 60 days [1] - China Mengniu Dairy (CIADY) is a manufacturer and distributor of dairy products primarily in China, with a current year earnings estimate revised 9.4% downward over the last 60 days [1]

Core Viewpoint - The average brokerage recommendation (ABR) for Amkor Technology (AMKR) is 1.88, indicating a consensus leaning towards a "Buy" rating, but caution is advised as brokerage recommendations may not reliably predict stock price movements [1][2]. Brokerage Recommendation Trends - The ABR of 1.88 is derived from eight brokerage firms, with four "Strong Buy" and one "Buy" recommendations, accounting for 50% and 12.5% of total recommendations respectively [1]. - Studies indicate that brokerage recommendations often show limited success in guiding investors towards stocks with the highest price increase potential due to analysts' inherent biases [2][5]. Zacks Rank vs. ABR - The Zacks Rank, which is based on earnings estimate revisions, is a more reliable indicator of near-term stock price performance compared to the ABR, which is solely based on brokerage recommendations [3][4]. - The Zacks Rank is displayed in whole numbers (1 to 5) and reflects timely updates based on analysts' earnings estimates, unlike the ABR which may not be current [4][6]. Earnings Estimate Revisions - The Zacks Consensus Estimate for Amkor Technology has decreased by 12.9% over the past month to $1.54, indicating growing pessimism among analysts regarding the company's earnings prospects [7]. - This decline in earnings estimates has resulted in a Zacks Rank of 4 (Sell) for Amkor Technology, suggesting potential downward pressure on the stock [7].

Industry Overview - The tech sector has experienced significant growth over the past year, largely driven by advancements in artificial intelligence, which has positively impacted the overall market and potentially averted a recession [1] - There is a growing sentiment among investors to look beyond the dominant tech stocks, often referred to as the "magnificent seven," to discover lesser-known tech stocks that may offer substantial growth potential [1][2] Company Highlights - **Amkor Technology (AMKR)**: - A chip testing and packaging firm that has seen its stock price decline from $44 to $38 since mid-July, making it a potential buy [3] - Expected earnings of $1.82 in 2024 with a forward P/E ratio of 26.5 suggests a target price of $48 [3] - Anticipated earnings growth of approximately 30% annually through 2026, indicating strong future demand for its shares [3] - **Wolfspeed (WOLF)**: - Focuses on manufacturing wide-bandgap semiconductors using silicon carbide and gallium nitride, which outperform traditional materials [4][5] - Although currently unprofitable, the company is expected to experience significant growth in the coming years, with analysts projecting a higher target price than its current valuation [5] - **Impinj (PI)**: - A leader in the RFID space, providing real-time visibility for physical items, with strong recognition in retail and supply chain sectors [6] - Reported Q2 revenues of $102 million, exceeding guidance, and per share earnings of $1.44 for the first half of 2024 [6] - Entered net profitability this year, with expected earnings growth of 30-50% over the next several years, positioning the company for explosive growth [7]

Company Overview - Amkor Technology reported Q2'24 earnings on July 29, 2024, showing strong results but softer-than-expected guidance for Q3'24, with revenue expected at $1.835 billion, up 26% sequentially, driven by advanced packaging [1] - The Q3'24 revenue guidance falls at the low end of analysts' estimates, indicating flat expectations for the OSAT market compared to Q3'23 [1] - Following the earnings release, Amkor's stock experienced significant selling pressure, dropping 18% immediately and continuing to decline, resulting in a total drop of 24% [1] Market Position and Performance - Amkor is positioned in a challenging market, with management indicating a slower-than-expected recovery in the automotive segment, suggesting ongoing destocking phases [2] - The communications segment saw a 17% year-over-year growth in Q2'24, attributed to new chip ramp-ups for the next iPhone release [3] - Management anticipates modest growth in the last two quarters of FY24, with growth rates of 3% and 8% for Q3'24 and Q4'24, respectively [4] Future Outlook - Forecasts for FY25 indicate a potential 23% decline in revenue due to a softening consumer market, but this may be offset by strength in the automotive segment as inventory destocking nears completion [4] - Amkor's utilization rate is currently in the low-70s, with expectations for stronger margins as production ramps up in Q3'24 [4] - The company is expected to see a recovery in EBITDA margins from 17% in FY23 and FY24 to 19% in FY25 due to increased demand for advanced packaging and high bandwidth memory chips [4] Stock Valuation - AMKR shares have experienced a sell-off post-earnings, but this reaction may present a buying opportunity as the growth trajectory appears more favorable in the long term [5][6] - Based on FY25 forecasts, AMKR shares are projected to be priced at $37.62, reflecting an EV/EBITDA multiple of 6.54x [6] - Technical analysis suggests that AMKR shares may decline towards $26 before completing a retracement process, allowing investors to average into a position [6]

Group 1 - Wall Street analysts' recommendations significantly influence investors' decisions regarding Amkor Technology (AMKR), with an average brokerage recommendation (ABR) of 1.71, indicating a consensus between Strong Buy and Buy [1][2] - The current ABR is based on seven brokerage firms, with four Strong Buy and one Buy recommendations, accounting for 57.1% and 14.3% of total recommendations respectively [1] - Despite the positive ABR, studies suggest that brokerage recommendations often lack reliability in predicting stock price increases due to analysts' inherent biases [2][5] Group 2 - The Zacks Rank, a proprietary stock rating tool, is presented as a more reliable indicator of near-term price performance, contrasting with the ABR which is solely based on brokerage recommendations [3][4] - The Zacks Rank is driven by earnings estimate revisions, which are closely correlated with stock price movements, while the ABR may not reflect the most current information [5][6] - For Amkor Technology, the Zacks Consensus Estimate for the current year has decreased by 12.9% to $1.54, leading to a Zacks Rank of 5 (Strong Sell), indicating potential near-term stock price declines [7]

Investment Rating - The report maintains a positive outlook on Amkor, with a revenue guidance for FY2024Q3 set between $1.785 billion and $1.885 billion, indicating a sequential growth of approximately 25.6% [15][20]. Core Insights - Amkor's FY2024Q2 revenue reached $1.461 billion, showing a year-over-year increase of 0.24% and a quarter-over-quarter increase of 7.03%, driven by strong demand for advanced packaging technologies in high-end smartphones and AI solutions [4][20]. - The company successfully expanded its 2.5D packaging capacity in South Korea and received certifications for advanced SAP and memory technologies in Vietnam, supporting RAM production in Q3 [14][20]. - The automotive and industrial markets showed a revenue decline of 2% quarter-over-quarter, attributed to weak downstream demand and prolonged inventory adjustments [8][18]. - The computing market experienced a significant revenue increase of 20% quarter-over-quarter, driven by strong demand for AI devices and new ARM-based PC products [10][18]. Summary by Sections Overall Performance - In FY2024Q2, Amkor achieved a gross profit of $212 million, with a gross margin of 14.5%, slightly down from the previous quarter but up from the previous year [4][20]. - Net income for the quarter was $67 million, reflecting a quarter-over-quarter increase of 11.89% and a year-over-year increase of 4.06% [4][20]. Performance by End Market 1. **Communications Market** - Revenue share was 48%, with a 10% increase quarter-over-quarter, driven by the launch of high-end iOS models [7][11]. 2. **Automotive and Industrial Market** - Revenue share was 20%, with a 2% decrease quarter-over-quarter, primarily due to weak downstream demand [8][18]. 3. **Consumer Market** - Revenue share was 12%, with a 6% decrease quarter-over-quarter, as traditional IoT devices were phased out [9][19]. 4. **Computing Market** - Revenue share was 20%, with a 20% increase quarter-over-quarter, benefiting from strong AI device demand [10][18]. Business Developments - Amkor received a $400 million grant from the U.S. Department of Commerce under the CHIPS Act to build a new facility in Arizona, aimed at supporting advanced packaging and testing for high-performance computing, AI, communications, and automotive markets [14][21]. Q3 Performance Guidance - For FY2024Q3, Amkor's revenue guidance is set at $1.835 billion, with a gross margin forecast between 14% and 16% [15][20]. - Net income guidance ranges from $105 million to $140 million, indicating a significant quarter-over-quarter increase [16][20]. Capital Expenditure - The company anticipates total capital expenditures of approximately $750 million for the year, focusing on expanding 2.5D and SIP advanced packaging capabilities [16][20].