Vivek Arya, an analyst from Bank of America Securities, maintained the Hold rating on GlobalFoundries Inc (GFS – Research Report). The associated price target is $65.00.
Vivek Arya has given his Hold rating due to a combination of factors affecting GlobalFoundries Inc. Arya acknowledges that while the company’s fourth-quarter sales aligned with expectations and earnings per share slightly exceeded predictions due to gross margin strengths and lower operational expenses, the first-quarter guidance appears notably weaker. The forecast for the first quarter suggests a substantial miss in sales compared to consensus estimates, with gross margins and operational margins expected to decline due to lower volume and utilization rates. This weak outlook is attributed to ongoing inventory adjustments in the mobile sector and potential oversupply in other markets like PCs and IoT.
Arya also points out that despite the margins being under pressure, GlobalFoundries’ cash flows seem to be improving, with a significant year-over-year reduction in capital expenditures. This trend is set to continue with an additional decrease projected for the next fiscal year. However, inventory days are still higher than the norm, indicating a slower inventory turnover, although the nature of the inventory with longer shelf lives mitigates this concern. Overall, while there are positive signs in terms of cash flow improvement, the uncertainties regarding sales volume, utilization, and increasing competition from Asian manufacturers contribute to Arya’s neutral stance on the GlobalFoundries stock.
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GlobalFoundries Inc (GFS) Company Description:
GLOBALFOUNDRIES Inc. is a semiconductor foundry. It manufactures complex ICs that enable electronic devices that are pervasive in every sector of the economy. It derives revenue primarily from fabricating semiconductor wafers using the company’s manufacturing processes for the company’s customers based on their proprietary integrated circuit designs and, from design, mask making, bumping, probing, assembly, and testing services.
Read More on GFS:
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