Why Amkor (AMKR) Stock Is Down Today

Kayode Omotosho /
2024/02/06 11:37 am EST

What Happened:

Shares of semiconductor packaging and testing company Amkor Technology (NASDAQ:AMKR) fell 7.1% in the morning session after the company reported fourth quarter results with revenue guidance for next quarter missed analysts' expectations. The company also reported a shrinking gross margin compared to the same quarter last year. 

Management highlighted weak macroeconomic conditions, excess inventory, and growing geopolitical tensions as some of the challenges experienced in 2023. Looking ahead, the company expects Q1'2024 to be impacted by a "seasonal decline" in its iOS-related business and continued weakness in the automotive and industrial end-market due to inventory corrections. As a result, the first half of the year is expected to remain muted, with guidance for a strong second-half recovery. While investors might be worried about the missed guidance, the company beat revenue and EPS during the quarter, which is reassuring. Zooming out, this was a mixed quarter, with the market now expecting the company to navigate the current headwinds and deliver on its second-half recovery promise.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Amkor? Access our full analysis report here, it's free.

What is the market telling us:

Amkor's shares are very volatile and over the last year have had 11 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 5 months ago, when the stock dropped 9.3% on the news that the company announced the launch of a secondary offering of 10 million shares of common stock by selling stockholders ( 915 Investments, LP). Note that the company's total base of shares is roughly 250 million. 915 Investments is an investment vehicle for members of the family of James J. Kim, the founder and executive chairman of the board of Amkor, and Susan Y. Kim, the executive vice chairman of the board. Following the sale, members of the Kim family and their affiliates will continue to own a majority of Amkor's shares. 

A secondary offering is when existing shareholders sell their shares to new investors. In the case of Amkor, the secondary offering is not being done by the company but by selling stockholders. This means that Amkor will not receive any proceeds from the sale. However, the offering could still have a negative impact on the company's stock price, as it could signal that existing shareholders believe the stock is overpriced or are not confident in the company's future prospects. This is not always the case, just a possibility.

Amkor is down 3.9% since the beginning of the year, and at $30.76 per share it is trading 10% below its 52-week high of $34.18 from December 2023. Investors who bought $1,000 worth of Amkor's shares 5 years ago would now be looking at an investment worth $3,564.

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