Amkor (NASDAQ:AMKR) Surprises With Q4 Sales But Quarterly Guidance Underwhelms

Jabin Bastian /
2023/02/13 4:09 pm EST

Semiconductor packaging and testing company Amkor Technology (NASDAQ:AMKR) reported results ahead of analyst expectations in the Q4 FY2022 quarter, with revenue up 10.5% year on year to $1.91 billion. However, guidance for the next quarter was less impressive, coming in at $1.45 billion at the midpoint, being 11.7% below analyst estimates. Amkor made a GAAP profit of $164.3 million, down on its profit of $217.3 million, in the same quarter last year.

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Amkor (AMKR) Q4 FY2022 Highlights:

  • Revenue: $1.91 billion vs analyst estimates of $1.85 billion (3.03% beat)
  • EPS: $0.67 vs analyst expectations of $0.70 (4.29% miss)
  • Revenue guidance for Q1 2023 is $1.45 billion at the midpoint, below analyst estimates of $1.64 billion
  • Free cash flow of $220.2 million, up from negative free cash flow of $151.8 million in previous quarter
  • Inventory Days Outstanding: 36, down from 37 previous quarter
  • Gross Margin (GAAP): 17.5%, down from 21% same quarter last year

“2022 was another great year for Amkor. We achieved record revenue of $7.1 billion and record EPS of $3.11. All end markets set new record revenue levels for the year, resulting in significant outperformance compared to the semiconductor market,” 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.

The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers and data storage. The growth of data and technologies like artificial intelligence, 5G networks and smart cars are also creating a next wave of growth for the industry. To keep up with ever changing customer needs requires new tools that can design, fabricate and test at ever smaller sizes and more complex architectures, and that is driving the demand for semiconductor capital manufacturing equipment.

Sales Growth

Amkor's revenue growth over the last three years has been strong, averaging 20.7% annually. But as you can see below, last year has not been especially strong, with quarterly revenue growing from $1.72 billion to $1.91 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

While Amkor beat analysts' revenue estimates, this was a very slow quarter with just 10.5% revenue growth. This marks 13 straight quarters of revenue growth, which means the current upcycle has had a good run, as a typical upcycle tends to be 8-10 quarters.

Amkor's revenue growth is expected to go negative next quarter, with the company guiding to decline of 9.19% YoY next quarter, but analyst consensus sees growth of 0.23% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business 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 inventory days came in at 36, 8 days above the five year average, suggesting that despite the recent decrease the inventory levels are still higher than what we used to see in the past.

Key Takeaways from Amkor's Q4 Results

With a market capitalization of $6.76 billion Amkor is among smaller companies, but its more than $1.24 billion in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were very impressed by the strong improvements in Amkor’s operating margin this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and gross margin deteriorated. Overall, this quarter's results were not the best we've seen from Amkor. The company is down 4.88% on the results and currently trades at $25.92 per share.

Amkor may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.