Dj Officer/Dir Kim Acquires 25000 Of Amkor Technology Inc >Amkr

Amkor Technology AMKR shares have plunged 23.7% year to date, underperforming the Zacks Electronics - Semiconductors industry, Zacks Computer and Technology sector and the S&P 500 index’s return of 33%, 26.3% and 23.9%, respectively.

Amkor stock continues to face a steady decline due to prolonged pressure on its top-line growth owing to weakness across traditional servers, networking and automotive end markets. AMKR’s mainstream product segment has been witnessing a year-over-year decline for the consecutive nine quarters.

Weak Automotive and Consumer Market Hurts AMKR

Amkor provides advanced packaging solutions to the producers of automotive and IoT wearable devices. In the automotive market, AMKR had been capitalizing on the growing use of semiconductor content used for advanced driver assistance systems, radar systems, infotainment, microcontrollers and telematics systems.

The rise in the use of IoT wearables, including hearables, watches, health trackers and augmented reality and virtual reality devices, created an opportunity for Amkor. AMKR provided advanced packaging solutions needed to build these small form factor systems like processors, sensors and connectivity devices.

However, due to the recent geopolitical tensions and macroeconomic pressure, the demand for advanced automotive and consumer electronic products has been subdued affecting Amkor’s revenues. In the third quarter of 2024, Amkor reported that sales across its industrial and automotive end market declined 17% year over year.

Amkor YTD Performance

Amkor Technology (AMKR) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.

Over the past month, shares of this chip packaging and test services provider have returned -15.4%, compared to the Zacks S&P 500 composite's +1% change. During this period, the Zacks Electronics - Semiconductors industry, which Amkor Technology falls in, has gained 0.1%. The key question now is: What could be the stock's future direction?

Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.

Earnings Estimate Revisions

Here at Zacks, we prioritize appraising the change in the projection of a company's future earnings over anything else. That's because we believe the present value of its future stream of earnings is what determines the fair value for its stock.

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, Amkor Technology is expected to post earnings of $0.41 per share, indicating a change of -14.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -31.3% over the last 30 days.

For the current fiscal year, the consensus earnings estimate of $1.42 points to a change of -2.7% from the prior year. Over the last 30 days, this estimate has changed -8%.

For the next fiscal year, the consensus earnings estimate of $1.85 indicates a change of +30.3% from what Amkor Technology is expected to report a year ago. Over the past month, the estimate has changed -18.5%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Amkor Technology is rated Zacks Rank #5 (Strong Sell).

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Revenue Growth Forecast

Even though a company's earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It's almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company's potential revenue growth is crucial.

For Amkor Technology, the consensus sales estimate for the current quarter of $1.65 billion indicates a year-over-year change of -5.8%. For the current and next fiscal years, $6.38 billion and $6.84 billion estimates indicate -1.9% and +7.1% changes, respectively.

Last Reported Results and Surprise History

Amkor Technology reported revenues of $1.86 billion in the last reported quarter, representing a year-over-year change of +2.2%. EPS of $0.49 for the same period compares with $0.54 a year ago.

Compared to the Zacks Consensus Estimate of $1.83 billion, the reported revenues represent a surprise of +1.55%. The EPS surprise was -2%.

Over the last four quarters, Amkor Technology surpassed consensus EPS estimates three times. The company topped consensus revenue estimates each time over this period.

Valuation

No investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.

Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Amkor Technology is graded B on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom Line

The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Amkor Technology. However, its Zacks Rank #5 does suggest that it may underperform the broader market in the near term.

Zacks Investment Research