Yahoo Finance Amkor (NASDAQ:AMKR) Reports Q2 In Line With Expectations But Stock Drops
Semiconductor packaging and testing company Amkor Technology (NASDAQ:AMKR) reported results in line with analysts' expectations in Q2 CY2024, with revenue flat year on year at $1.46 billion. On the other hand, next quarter's revenue guidance of $1.84 billion was less impressive, coming in 1.8% below analysts' estimates. It made a GAAP profit of $0.27 per share, improving from its profit of $0.26 per share in the same quarter last year.
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Amkor (AMKR) Q2 CY2024 Highlights:
Revenue: $1.46 billion vs analyst estimates of $1.45 billion (small beat)
EPS: $0.27 vs analyst estimates of $0.22 (23.4% beat)
Revenue Guidance for Q3 CY2024 is $1.84 billion at the midpoint, below analyst estimates of $1.87 billion
Gross Margin (GAAP): 14.5%, up from 12.8% in the same quarter last year
Inventory Days Outstanding: 28, up from 26 in the previous quarter
Free Cash Flow was -$244.6 million, down from $66.14 million in the previous quarter
Market Capitalization: $9.39 billion
“Amkor delivered second quarter results in line with expectations. Revenue of $1.46 billion was up 7% sequentially, driven by Advanced packaging supporting premium tier smartphones and AI solutions utilizing 2.5D technology,” said Giel Rutten, Amkor’s president and chief executive officer.
Operating through a largely Asian facility footprint, Amkor Technologies (NASDAQ:AMKR) provides outsourced packaging and testing for semiconductors.
Semiconductor Manufacturing
The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers, and data storage. The need for technologies like artificial intelligence, 5G networks, and smart cars is also creating the next wave of growth for the industry. Keeping up with this dynamism requires new tools that can design, fabricate, and test chips at ever smaller sizes and more complex architectures, creating a dire need for semiconductor capital manufacturing equipment.
Sales Growth
Amkor's revenue growth over the last three years has been unimpressive, averaging 6.1% annually. As you can see below, this was a weaker quarter for the company, with revenue growing from $1.46 billion in the same quarter last year to $1.46 billion. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
This was a sluggish quarter for the company as its revenue grew 0.2% year on year, in line with analysts' estimates. Amkor's growth, however, flipped from negative to positive this quarter. This encouraging sign will likely be welcomed by shareholders.
Amkor returned to positive revenue growth this quarter and its management team expects the trend to continue. The company is guiding to 0.7% year-on-year growth next quarter, and analysts seem to agree, forecasting 9.9% growth over the next 12 months.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Amkor's DIO came in at 28, which is 3 days below its five-year average. These numbers show that despite the recent increase, there's no indication of an excessive inventory buildup.
Key Takeaways from Amkor's Q2 Results
We were impressed by Amkor's gross margin improvement this quarter and were glad its operating margin also improved. On the other hand, its revenue guidance for next quarter missed analysts' expectations and its inventory levels increased. Zooming out, we think this was still a decent quarter, showing the company is staying on track. However, investors were likely expecting more, and the stock traded down 6.9% to $35 immediately following the results.
So should you invest in Amkor right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
