Amkor Stock: Super-Cheap Semiconductor Play Could Double or Triple

AMKR Stock Is a Value Play on the Battered Semiconductor Sector

Semiconductor stocks have taken a beating this year, and until we get some positive economic news, they’ll likely remain pressured. The selling has been across the entire sector. No semiconductor stocks have escaped the carnage. Even the biggest names are down by more than 50% this year.

Rising interest rates and a slowing of the semiconductor industry have driven the stock market selling. But for investors with a long-term perspective, there are opportunities to pick up semiconductor stocks on the price weakness.

In the mid-cap semiconductor space, Amkor Technology, Inc. (NASDAQ:AMKR) has an attractive valuation and strong growth potential. As of this writing, Amkor stock is down by 40% from its record high, which was set in September 2021, so I see it as a long-term opportunity.

Amkor Technology, Inc. provides semiconductor packaging and test services to semiconductor companies, foundries, and electronics original equipment manufacturers (OEMs). The company’s solutions form a key part of the semiconductor supply chain.

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Amkor’s end markets include the automotive, communications, computing, consumer, and industrial sectors. (Source: “Amkor Technology, Inc. Investor Presentation: May 2022, “ Amkor Technology, Inc., last accessed September 29, 2022.)

End MarketPercentage of Amkor’s
2021 Revenues
Communications41%
Consumer22%
Automotive & Industrial21%
Computing16%

(Source: Ibid.)

The below chart shows AMKR stock in a clearly defined downward channel after trading at its high. Shares of Amkor Technology, Inc. mounted a trendline breakout in August during a rally by the technology sector but failed to hold.

Amkor stock is back below its 50-day and 200-day moving averages, which I view as an opportunity. The downside risk is around $14.00 to $15.00.

Chart courtesy of StockCharts.com

Amkor Technology, Inc.’s Financial Performance

Amkor delivered revenue growth in three of the last five years. This included double-digit growth in 2020 and a record $6.1 billion in 2021 after the company’s revenues declined in 2019.

Fiscal YearRevenues (Billions)Growth
2017$4.2N/A
2018$4.32.6%
2019$4.1-6.1%
2020$5.124.6%
2021$6.121.5%

(Source: “Amkor Technology, Inc,” MarketWatch, last accessed September 29, 2022.)

Despite the economic situation and the slowing of the semiconductor market, things should improve for Amkor. Analysts expect the company to increase its revenues by 12.4% to $6.9 billion this year and by 4.1% to $7.2 billion in 2023. (Source: “Amkor Technology, Inc. (AMKR),” Yahoo! Finance, last accessed September 29, 2022.)

Even with the lower revenue growth, the company’s valuation is attractive, at only 0.7 times its 2021 revenues and 0.6 times its consensus 2023 revenue estimate. Compared to those of its peer group, Amkor Technology, Inc.’s multiples are low and support a higher price for Amkor stock.

Moreover, the company is highly profitable and it generates positive free cash flow.

Analysts expect Amkor Technology, Inc. to report earnings of $3.01 per diluted share this year and $3.20 per diluted share in 2023. This implies a low forward multiple of 5.5 times the company’s consensus 2023 revenue estimate. You would have to search hard to find a valuation as low as that.

Analyst Take

Amkor stock looks compelling, based on the company’s trailing financial results and forward estimates.

Amkor Technology, Inc. trades at a mere 1.3 times its book value and has a low enterprise value to revenue ratio of only 0.7.

Investors might want to consider AMKR stock while its price is weak, since it could rise within the next few years.