The tech sector took a hit when interest rates began to increase last year. However, Tower Semiconductor Ltd (NASDAQ:TSEM) presents a compelling investment opportunity at its currently low valuation. With a forward P/E ratio of just 14, the stock appears undervalued compared to its historical multiple.
Tower Semiconductor has exhibited impressive bottom line growth over the past five years, with a nearly doubling of year-over-year (YoY) growth. While this level of momentum may not be sustainable in the long run, a significant portion of it can be maintained. Furthermore, the company’s partnership with Intel Corporation (INTC) is expected to accelerate growth and counteract the short-lived impact of higher interest rates on demand.
One sector where Tower Semiconductor thrives is the dental x-ray market. As the demand for oral aesthetics increases, more x-rays are required, positively impacting the demand for TSEM’s products and services. Additionally, TSEM operates in other niches such as industrial machine vision and high-end photography within the broader semiconductor market, which is anticipated to experience rapid growth in the coming years.
Despite the termination of the deal between Intel and TSEM due to geopolitical tensions between China and the US, Tower Semiconductor remains in a favorable position to benefit from increased demand. Intel will still contribute to TSEM’s success, allowing the company to access a share of the semiconductor market in Asia.
Tower Semiconductor’s recent earnings report showed a 19% decline in YoY revenue due to a cooling off of demand after several years of high growth. However, the company managed to maintain its bottom line by posting a higher EPS YoY, thanks in part to the termination fee received from Intel. The focus for the next quarter will be on improving margins and EPS growth.
Looking ahead, Tower Semiconductor’s valuation is reliant on continued demand in the markets it operates in and the growth potential of these markets. With an expected compound annual growth rate (CAGR) of 9-10% for EPS over the next decade, TSEM is poised for steady growth. The dental x-ray market, combined with the overall growth of the semiconductor industry, further solidifies its promising prospects.
In conclusion, Tower Semiconductor Ltd presents an appealing investment opportunity within the tech sector. Despite recent challenges, the company’s partnerships, market segments, and potential for sustained growth make it a buy-rated stock with significant upside potential.
The source of the article is from the blog xn--campiahoy-p6a.es