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Semiconductors are the building blocks for electronic devices, enabling everything from smartphones to supercomputers. The emergence of artificial intelligence (AI) has driven a significantly greater demand for semiconductors, and particularly specialized chips. As AI applications expand, advanced chip packaging becomes crucial for better performance and efficiency. The chip packaging market is projected to hit $76.2 billion by 2032, expanding at a 9.2% compound annual growth rate (CAGR), creating major opportunities for semiconductor packaging companies.
Amkor Technology (AMKR), a leader in this field, is well-positioned to capitalize on AI’s rise, benefiting from its strong industry presence in advanced packaging solutions. JPMorgan (JPM) analysts recognized this unique market foothold in a recent analyst note, saying that Amkor is set to be an AI winner.
Despite AMKR already outperforming the broader market, the stock's valuation indicates ample room for further growth, particularly for investors eyeing a value-driven semiconductor stock priced under $50.
About Amkor Technology Stock
Headquartered in Tempe, Arizona, Amkor Technology, Inc. (AMKR) provides outsourced semiconductor packaging and test services globally. With a market cap of $10 billion, it offers comprehensive solutions, including flip-chip packages for mobile devices, memory products, wafer-level packages for sensors and wireless devices, and advanced system-in-package modules.
As AI evolves, the need for sophisticated packaging techniques grows - a niche where Amkor excels. Amkor Technology meets the demands of AI packaging with its leadership in chip-on-wafer-on-substrate (CoWoS) (2.5D) packaging, integrating multiple circuits into a single package.
Shares of the semiconductor packaging provider have gained 50% over the past 52 weeks, outperforming both the broader S&P 500 Index’s ($SPX) 26.7% gains and the S&P Semiconductor SPDR’s (XSD) 19.9% returns over the same time frame.
In fact, on Tuesday, AMKR stock hit a new high of $42.13 before paring its gains slightly.
Amkor Technology has been rewarding its shareholders and boosting dividends for three straight years. On June 24, the company paid a $0.07875 per share quarterly dividend, up 5% from the year-ago quarter. The annualized payout of $0.31 per share translates to a 0.76% forward yield, and its conservative 20.3% payout ratio signals the potential for future dividend growth, which should appeal to income-minded investors seeking reliability.
In terms of valuation, the stock trades at 22.60 times forward earnings and 1.51 times sales, both of which are a discount to the tech sector medians.
Amkor’s Q1 EPS Beats The Street
Shares of Amkor Technology rose 2.8% following its Q1 earnings results on April 29, which exceeded Wall Street’s bottom-line forecasts. While the company’s net sales dipped 7.2% annually to a lighter-than-expected $1.4 billion, adjusted EPS rose 33.3% to $0.24, which surpassed projections by 140%.
During the quarter, Amkor ramped up its 2.5D tech capacity to boost AI device output, forged stronger European supply chain partnerships, advanced its Arizona facility plans, and geared up its Vietnam factory for a production surge in the second half of the year. Despite a dip in revenue from automotive and industrial markets, Amkor is focused on tech expansion, aiming to expand its 2.5D capacity by the end of Q2.
The company is expected to unveil its Q2 earnings results on July 29, with management anticipating net sales between $1.4 billion and $1.5 billion, gross margin between 13% and 15%, and net income between $35 million and $75 million, or $0.14 and $0.30 per share. Analysts tracking Amkor anticipate its profit per share to be $0.22, down 15.4% from the year-ago quarter.
However, for the full fiscal year, analysts predict Amkor’s EPS will grow 20.6% annually to $1.76, and rise by another 40.3% to $2.47 in fiscal 2025.
What Do Analysts Expect For AMKR Stock?
Last week, JPMorgan initiated coverage on Amkor Technology, assigning the stock an “Overweight” rating and setting a price target of $48, implying a potential upside of 14.4% from the current price levels.
Led by analyst Peter Peng, the team highlighted Amkor as pivotal in the outsourced semiconductor assembly and test (OSAT) sector, which is crucial for enabling AI advancements, high-performance computing, 5G, and EVs. These technologies drive robust demand for advanced packaging solutions, leveraging higher compute performance and energy efficiency.
Peng emphasized Amkor's strong position in advanced packaging, which constitutes 75% to 80% of its sales, and its growing foothold in the expanding AI market. The analysts anticipate that the OSAT serviceable addressable market, which they value at around $40 billion, is projected to expand at 5% to 7% CAGR, with Amkor expected to outpace industry growth by 1.2x to 1.5x.
The factors driving Amkor’s outperformance, in JPMorgan’s view, include its differentiated advanced technology portfolio, positive outsourcing trends, customer acquisitions, and favorable geographic positioning.
Amkor Technology has a consensus “Moderate Buy” rating overall. Out of the seven analysts covering the stock, four recommend a “Strong Buy,” one suggests a “Moderate Buy,” and the remaining two advise a “Hold.”
Although the mean price target of $41 suggests AMKR is fully valued around current price levels, the Street-high target price of $50, newly raised by B. Riley Securities in June, implies the stock could rally as much as 19.2%.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
