Amkor (NASDAQ:AMKR) Q4: Beats On Revenue But Stock Drops On Weak Guidance

Petr Huřťák /
2024/02/05 4:17 pm EST

Semiconductor packaging and testing company Amkor Technology (NASDAQ:AMKR) reported Q4 FY2023 results beating Wall Street analysts' expectations, with revenue down 8.1% year on year to $1.75 billion. On the other hand, next quarter's revenue guidance of $1.35 billion was less impressive, coming in 10.5% below analysts' estimates. It made a GAAP profit of $0.48 per share, down from its profit of $0.67 per share in the same quarter last year.

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Amkor (AMKR) Q4 FY2023 Highlights:

  • Revenue: $1.75 billion vs analyst estimates of $1.72 billion (2.1% beat)
  • EPS: $0.48 vs analyst estimates of $0.41 (17.3% beat)
  • Revenue Guidance for Q1 2024 is $1.35 billion at the midpoint, below analyst estimates of $1.51 billion
  • Free Cash Flow of $336 million, up from $44.26 million in the previous quarter
  • Inventory Days Outstanding: 24, down from 28 in the previous quarter
  • Gross Margin (GAAP): 15.9%, down from 17.5% in the same quarter last year
  • Market Capitalization: $7.85 billion

“In 2023, amid a cyclical downturn, Amkor outperformed the semiconductor industry by maintaining our strategic focus on Advanced packaging,” 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 unremarkable, averaging 9.6% annually. This quarter, its revenue declined from $1.91 billion in the same quarter last year to $1.75 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).

Amkor Total Revenue

Even though Amkor surpassed analysts' revenue estimates, this was a slow quarter for the company as its revenue dropped 8.1% year on year. This could mean that the current downcycle is deepening.

But Amkor may be headed for an upturn soon. Although the company is guiding for a year-on-year revenue decline of 8.3% next quarter, analysts are expecting revenue to grow 5.3% 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.

Amkor Inventory Days Outstanding

This quarter, Amkor's DIO came in at 24, which is 6 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.

Key Takeaways from Amkor's Q4 Results

We were impressed by Amkor's strong improvement in inventory levels. We were also glad its operating margin improved. On the other hand, its revenue guidance for next quarter missed analysts' expectations and its gross margin shrunk. Zooming out, we think this was mixed. The market was likely expecting more, and the stock is down 7.1% after reporting, trading at $30.01 per share.

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.

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