Amkor Technology (AMKR - Analyst Report) is one of the worlds largest independent providers of semiconductor packaging and test services. This space has been particularly hot of late and a mega-deal may be in the works (more on that in a bit). Today this stock is the Bull of the Day.
Strong Industry and Zacks Rank
Amkor Technology (AMKR - Analyst Report) not only has the strong Zack Rank, but the Industry that AMRK is currently ranked 36/265 making it the top 14% of all industriesBeing the Bull of the Day is all about why a stock has reached the highly desired position of a Zacks Rank #1 (Strong Buy). The company posted a super strong December 2014 quarter in early February in reporting earnings of $0.38, easily topping the Zacks Consensus Estimate of $0.13. The $0.25 beat translates to a 192% positive earnings surprise and that helped push the stock higher by nearly 24% in the session following the report.
Description
Amkor Technology provides outsourced semiconductor packaging and test services. The company offers turnkey packaging and test services, including semiconductor wafer bumps, wafer probes, wafer backgrinds, package design, packaging, and test and drop shipment services. The company primarily serves integrated device manufacturers, fabless semiconductor companies. Amkor Technology was founded in 1968 and is headquartered in Tempe, Arizona.
Earnings History
The company has a solid earnings history, as they have beaten the Zacks Consensus Estimate in 7 of the last 9 quarters. The most recent beat was rather impressive and that has really woken up investors to the industry.
That recent beat is described above, but allow me to add a critical detail. Revenue came in at $853M, 9% ahead of expectations for the biggest revenue beat since the June 2009 quarter. Revenue growth is a critical success factor that aggressive growth investors look for.
Earnings Estimates
The Zacks Consensus Estimate spiked following the early February earnings report. The Zacks Consensus Estimate for 2015 was $0.65 in January but launched higher to $0.80 in February and that is where it has remained throughout March. The Zacks Consensus Estimate for 2016 jumped from $0.80 to $1.00, so another big move there.
The valuation for AMKR is very attractive to most investors. The trailing and forward PE of 11x is below the 18.3x and 17x industry average respectfully. The price to book multiple of 1.8x is well below the 2.8x industry average and is low enough to get this stock on a lot value screens. The price to sales multiple of 0.7x is also well below the 2.7x industry average and really has to get some investors excited.Valuation
The reason for the lower valuation is that the company is expected to see revenue growth of only 4.6% this year and 7.2% next year. That does not compare favorably to the 10.6% revenue growth the industry is looking for this year, but AMKR is expected to outpace the industry average of 6.5% topline growth for next year.
Sector Rotation
We are seeing signs that a sector rotation into the semiconductors is already underway. Recent highs of $10 could be retested soon but I will leave that idea to the people that follow charts.
Finally, the (INTC - Snapshot Report) for (ALTR - Snapshot Report) deal might get done sometime next week and it was rumored to go off at a price of $52 for each share of ALTR. When that deal does get done, and it is looking like it will, that will lift all boats in the semiconductor harbor.
Chart
Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.
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