TSEM Stock: The Wafer Specialist for Smart Devices

TSEM Stock
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Tower Semiconductor Stock Has Multiple Growth Markets

Today’s stock represents another of our favorite stock investing strategies: venture capital investing—investing in companies that build great products for diverse industries. In the age of smart and connected devices, there are strong players that have the expertise to build products to keep such new age devices up and running. The broad range of the applications of such devices implies that the growth opportunities are huge. And there is one venture capital stock that is in a great position to capitalize on this.

Our focus today is Tower Semiconductor Ltd. (NASDAQ:TSEM), also known by the global brand name of TowerJazz, a leader in specialty foundry. It manufactures advanced analog-integrated circuits for a strong and diversified customer base worldwide in growing markets such as consumer, automotive, industrial, and medical among others.

TowerJazz has a presence in different geographies and has deep and broad experience in manufacturing numerous different types of technologies. To ensure operational flexibility and to assure global capacity, TowerJazz operates seven manufacturing facilities in three locations worldwide and produces over 2.3-million wafers per year. The dominating position of the company in its markets is reflected in the rise of TSEM stock over the years.

Of the many products that it builds, let us focus on just one—image sensors. Image sensors detect and convey the information that constitutes an image. The company’s advanced and proven CMOS image sensor technology meets the growing demand for optical sensors used in high-end photography, industrial, automotive, medical, and consumer applications, including high-end camera phones and 3D cameras.

As per a research report by MarketsandMarkets, the image sensor market is likely to reach around $17.5 billion by 2020, which translates into a CAGR of 10.30% between 2015 and 2020. (Source: “Image Sensor Market – Global Forecast to 2020,” MarketsandMarkets Research Private Ltd., October 2015.)

TowerJazz has acquired leadership status in CMOS sensors and pixel technology from its proven ability to supply sensors, which have the best-in-class performance and are customized to product and application needs. The company primarily serves six different market segments within the CMOS Image Sensor (CIS) general market: automotive, machine vision, high-end photography and cinematography, dental and medical X-ray, 3D and AR/VR (augmented reality and virtual reality), and security. These markets have the potential to keep growing bigger and this could push TSEM stock higher.

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TowerJazz provides the best-in-class pixel technology, which is tailored to each specific sensor application areas in these expanding markets and continues to invest to improve its technological strength.

TowerJazz has continued its high growth rate of about 30% year-over-year and has established a top position as an analog pureplay foundry provider. With multiple geographic locations, advanced technology diversity, and a big and growing customer base, TSEM stock has a lot of room to grow.

2016 was an exceptional year, with the best business and financial performance in the history of the company. TowerJazz continued to strengthen its position as the dominating player in the global specialty foundry industry while presenting another year of record revenues (having reached $1.25-billion), record EBITDA of over $365.0 million, and record net profits of over $200.0 million. (Source: “TowerJazz Reports Increase in Net Profit,” TowerJazz, November 7, 2017.)

TowerJazz announced its third-quarter results last week and reported an increase in net profit. The revenue went up nine percent year-over-year, to reach $355.0 million. CEO Russell Ellwanger highlighted the variety of significant global automotive offerings and partnerships together with the ongoing initiatives in China.  

TSEM stock has been growing up gradually over the past few years, as the company keeps adding to its capabilities. The stock has gained more than 340% over the last five years and more than 100% over the last one year.

TSEM price chart

Chart courtesy of StockCharts.com

The company has been changing its strategies and tactics over the years, in response to the market changes and customer needs, thus increasing its capabilities. Its goal remains to continue its proven successful business model, driving analog leadership with low-cost capacity expansion, resulting in strong increasing revenue with a proportional growth in margins, profits, and free cash flow.

Analyst Take:

Tower Semiconductor builds designs for connected and smart devices that require high reliability and low power foundry solutions. The company is well-positioned in the fastest growing markets with long-term customer relationships and roadmap alignment.

As TowerJazz expands its capabilities, manufacturing capacity, and global reach, it continues to build on its market and technology leadership to maintain its position as the global specialty foundry leader. With smart devices becoming a significant part of our lives in the coming years, this venture capital stock has a lot of room to grow.