Compelling Risk/Reward Opportunity: indie Semiconductor Stock Could Generate a Double

indie Semiconductor Inc Drives New Tech for Auto Sector

Automotive companies, both legacy and pure-play electric vehicle (EV) companies. First it was the supply chain disruptions of semiconductor chips. Now it’s the soft demand for new vehicles as interest rates rise and consumers reduce their spending.

The macroeconomic conditions for the auto industry will improve over time, and the rebound will provide bullish tailwinds for semiconductor stocks. Take the case of indie Semiconductor Inc (NASDAQ:INDI).

INDI stock is a compelling play on the future of the auto industry. The company develops semiconductors and software for the auto industry. Its clients comprise 20 global auto sector manufacturers, including 12 Tier-1 suppliers.

indie Semiconductor Inc’s products are designed for vehicles with next-generation technologies, including advanced driver assistance systems (ADASs), connectivity, and electrification applications for EVs. (Source: “Corporate Overview: Fall 2022,” indie Semiconductor Inc, last accessed November 2, 2022.)

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The company has a market valuation of $1.0 billion, but the company is still in its early stage of growth. indie Semiconductor Inc’s annual revenues have more than doubled from $22.6 million in 2020 to $48.4 million in 2021.

Analysts estimate that the company will report 129% revenue growth to $110.8 million this year and 102% growth to $223.9 million in 2023. (Source: “indie Semiconductor, Inc. (INDI),” Yahoo! Finance, last accessed November 2, 2022.)

This estimate implies a forward multiple of 4.4 times the company’s consensus 2023 revenue estimate, which is reasonable for a growth stock like indie Semiconductor stock.

Compelling Risk/Reward Trade-Off With INDI Stock

indie Semiconductor stock has been declining since reaching its high in November 2021.

The recent selling of technology stocks has driven INDI stock down by 38% this year and 54% from its 52-week high of $16.33. This presents contrarian investors with a potentially high-prospects trade.

In February 2022, a death cross pattern surfaced on indie Semiconductor Inc’s stock chart, with the stock’s price declining below key support at $8.60. A death cross is a bearish chart formation that occurs when the 50-day moving average falls below the 200-day moving average.

In more positive news, indie Semiconductor stock recently flashed a golden cross pattern after its 50-day moving average broke above its 200-day moving average. This is bullish if the trend holds.

Chart courtesy of StockCharts.com

INDI stock will face key resistance around $8.60. A sustained break could see the stock move toward $11.00–$13.00 and retest its high. The downside support for indie Semiconductor stock is in the range of $5.00 to $6.00.

Analyst Take

With its recent price deterioration, shares of indie Semiconductor Inc look more appealing than before, especially if the company’s revenue estimates pan out.

INDI stock is a high-risk investment, but it could provide a big payoff if the company delivers financial growth.