Tower Semiconductor (NASDAQ: TSEM) has propelled itself to new heights in this week’s trading. The Israel-based chip company’s share price surged by a remarkable 15.2% from last week’s market close as of 3:15 p.m. ET Friday, as per data from S&P Global Market Intelligence.
Tower Semiconductor presented its fourth-quarter results before the market opened on Feb. 14. The company reported earnings per share of $0.55 on sales of $351.71 million. Even though sales dipped due to weaker demand in the automotive sector, this performance surpassed the average analyst estimate, which had projected per-share earnings of $0.52 on sales of $350 million.
The Tides of Cyclicality
Despite surpassing Wall Street’s expectations, Tower Semiconductor’s revenue dwindled approximately 12.8% year over year in the fourth quarter. Gross profit for the quarter stood at $84 million, down from $87 million in the previous year. For context, the company posted a gross profit of $125 million in Q4 2022.
Soft demand in some key segments exerted downward pressure on sales and gross profit in the period, but signs of improvement are beginning to emerge. The company’s forward guidance suggests that it may be on the cusp of emerging from a cyclical downturn.
Tower’s North Star
As for the first quarter, Tower projects sales of around $325 million—with the potential for sales to range from 5% lower to 5% higher than the target mark. Looking ahead, the chip company anticipates substantial sequential quarterly sales growth to persist throughout 2024.
TSEM PS Ratio (Forward) data by YCharts
Tower Semiconductor is currently trading at roughly 17.8 times this year’s anticipated earnings and 2.7 times expected sales. While the business has been subject to cyclicality in some of its key industry segments, it appears that performance is poised to improve in the near term.
Tower had previously been on track to be acquired by Intel, but the deal faltered after the two companies failed to promptly secure approval from Chinese regulators. With the chip specialist’s business seemingly poised to gain momentum and its stock still trading significantly below the price when the potential acquisition was abandoned, investors may want to take a closer look.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tower Semiconductor. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
