Amkor Technology: Weak Near-Term Guidance Has Created A Buying Opportunity Post-Q2

Core Viewpoint - Amkor Technology's Q2'24 results and guidance were below expectations, leading to an 18% drop in shares, but the company is considered to have strong value due to its market position and advanced packaging solutions [1] Company Overview - Amkor Technology is the second largest outsourced assembly and test supplier, focusing on advanced packaging solutions which account for three-quarters of its revenues [2] - The company generated $6.5 billion in revenues for 2023, with a high-single-digit revenue CAGR over recent years [2] - Major customers include Apple, QUALCOMM, Skyworks, NVIDIA, and NXP [2] Q2 Results - In Q2'24, Amkor reported revenues of $1.46 billion, flat year-over-year but exceeding analyst estimates by $10 million [3] - EBITDA was $247 million, with an EPS of $0.27, beating consensus estimates by 5 cents [3] Operating Income and EPS - EPS of $0.27 was 3 cents higher than the previous quarter and 1 cent higher than Q2 last year [4] - Operating margins expanded to 5.0%, with a capex forecast of $750 million for increasing advanced packaging capacity [4] Market Demand - Q2'24 results were driven by strong demand in the Communications and Computing end markets, particularly for advanced packaging in premium tech smartphones and AI solutions [5] - The Communications segment accounts for 48% of revenues, with a strong presence in smartphone applications [6] Manufacturing and Geopolitical Strategy - Amkor established a U.S. manufacturing facility for advanced packaging and is in discussions for up to $400 million in grants under the CHIPS and Science Act [8] - The company is diversifying manufacturing capacity across the U.S. and Vietnam, positioning itself well for semiconductor on-shoring trends [8] Financial Position - At the end of the quarter, Amkor had cash and cash equivalents of $1.5 billion and liquidity of $2.2 billion, with total debt of $1.1 billion, resulting in a Total Debt to EBITDA ratio of 1.0x [9] Valuation and Growth Potential - Analysts project EPS growth from $1.46 in 2023 to $3.20 by 2026, indicating strong long-term growth potential [12] - Amkor's current valuation at 7.6x EV/EBITDA is above its historical average, justified by industry dynamics and on-shoring trends [12]