SKYT Stock Plunges 38% in a Year: Should You Buy the Dip or Wait?

Core Viewpoint - SkyWater Technology (SKYT) has experienced significant stock underperformance, losing 37.7% over the past 12 months, compared to the S&P 500's gain of 9.5% and the Zacks Electronics – Semiconductors industry's growth of 0.9% [1][2] Company Performance - The decline in SKYT's stock is linked to negative sentiment in the semiconductor sector, with concerns about the sustainability of the AI trend impacting investor confidence [2] - Wafer Services revenues fell by 56% to $26.9 million in 2024, primarily due to ongoing weakness in the automotive and industrial sectors [2] Strategic Initiatives - To improve its market position, the company is acquiring Infineon's Fab 25, a 200mm chip manufacturing facility in Austin, TX, which is expected to generate approximately $300 million in annual Wafer Services revenues [4] - SkyWater has launched ThermaView Solutions to penetrate the thermal imaging market, aiming for long-term revenue growth in its Wafer Services segment [5] - The product mix in Wafer Services is projected to shift from 90% legacy products and 10% new products in 2024 to 60% new products in 2025 [5] Competitive Landscape - SkyWater competes with major players like Tower Semiconductor, GlobalFoundries, and ON Semiconductor, which have seen stock declines of 3.2%, 32%, and 48.7% respectively over the past year [6] - The company differentiates itself by focusing on specialized, high-value chip production and benefits from being a Department of Defense-accredited foundry, allowing access to government contracts [7] Financial Guidance - For Q1 2025, SKYT anticipates a non-GAAP loss per share between 10-16 cents and revenues between $59-$63 million, reflecting a year-over-year revenue decline of 23.34% [8] Recent Performance - SKYT has outperformed Zacks Consensus Estimates for earnings in three of the last four quarters, with an average surprise of 179.29% [9] Long-term Outlook - Strategic moves like the acquisition of Fab 25 and the launch of ThermaView demonstrate the company's commitment to growth and innovation, positioning it favorably in the evolving semiconductor market [11] - Support from the CHIPS Act and partnerships with companies like Quantum-Si Incorporated and NanoDx further enhance its long-term potential [11] Investment Potential - SKYT holds a Zacks Rank 1 (Strong Buy) and a Growth Score of A, indicating a strong investment opportunity according to Zacks' methodology [12]