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Amkor Technology: Weak Near-Term Guidance Has Created A Buying Opportunity Post-Q2
AMKRAmkor Technology(AMKR) Seeking Alpha·2024-07-31 09:09

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 6.5billioninrevenuesfor2023,withahighsingledigitrevenueCAGRoverrecentyears[2]MajorcustomersincludeApple,QUALCOMM,Skyworks,NVIDIA,andNXP[2]Q2ResultsInQ224,Amkorreportedrevenuesof6.5 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 10million[3]EBITDAwas10 million [3] - EBITDA was 247 million, with an EPS of 0.27,beatingconsensusestimatesby5cents[3]OperatingIncomeandEPSEPSof0.27, 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 750millionforincreasingadvancedpackagingcapacity[4]MarketDemandQ224resultsweredrivenbystrongdemandintheCommunicationsandComputingendmarkets,particularlyforadvancedpackaginginpremiumtechsmartphonesandAIsolutions[5]TheCommunicationssegmentaccountsfor48750 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 1.5billionandliquidityof1.5 billion and liquidity of 2.2 billion, with total debt of 1.1billion,resultinginaTotalDebttoEBITDAratioof1.0x[9]ValuationandGrowthPotentialAnalystsprojectEPSgrowthfrom1.1 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]