Group 1 - Amkor Technology (AMKR) is the world's largest independent provider of semiconductor packaging and test services, with a current year earnings estimate revised 13.5% downward over the last 60 days [1] - BioTechne Corp (TECH) is a global life sciences company that develops, manufactures, and sells biotechnology products and clinical diagnostic controls, with a current year earnings estimate revised almost 9.7% downward over the last 60 days [1] - China Mengniu Dairy (CIADY) is a manufacturer and distributor of dairy products primarily in China, with a current year earnings estimate revised 9.4% downward over the last 60 days [1]

Core Viewpoint - The average brokerage recommendation (ABR) for Amkor Technology (AMKR) is 1.88, indicating a consensus leaning towards a "Buy" rating, but caution is advised as brokerage recommendations may not reliably predict stock price movements [1][2]. Brokerage Recommendation Trends - The ABR of 1.88 is derived from eight brokerage firms, with four "Strong Buy" and one "Buy" recommendations, accounting for 50% and 12.5% of total recommendations respectively [1]. - Studies indicate that brokerage recommendations often show limited success in guiding investors towards stocks with the highest price increase potential due to analysts' inherent biases [2][5]. Zacks Rank vs. ABR - The Zacks Rank, which is based on earnings estimate revisions, is a more reliable indicator of near-term stock price performance compared to the ABR, which is solely based on brokerage recommendations [3][4]. - The Zacks Rank is displayed in whole numbers (1 to 5) and reflects timely updates based on analysts' earnings estimates, unlike the ABR which may not be current [4][6]. Earnings Estimate Revisions - The Zacks Consensus Estimate for Amkor Technology has decreased by 12.9% over the past month to $1.54, indicating growing pessimism among analysts regarding the company's earnings prospects [7]. - This decline in earnings estimates has resulted in a Zacks Rank of 4 (Sell) for Amkor Technology, suggesting potential downward pressure on the stock [7].

Industry Overview - The tech sector has experienced significant growth over the past year, largely driven by advancements in artificial intelligence, which has positively impacted the overall market and potentially averted a recession [1] - There is a growing sentiment among investors to look beyond the dominant tech stocks, often referred to as the "magnificent seven," to discover lesser-known tech stocks that may offer substantial growth potential [1][2] Company Highlights - **Amkor Technology (AMKR)**: - A chip testing and packaging firm that has seen its stock price decline from $44 to $38 since mid-July, making it a potential buy [3] - Expected earnings of $1.82 in 2024 with a forward P/E ratio of 26.5 suggests a target price of $48 [3] - Anticipated earnings growth of approximately 30% annually through 2026, indicating strong future demand for its shares [3] - **Wolfspeed (WOLF)**: - Focuses on manufacturing wide-bandgap semiconductors using silicon carbide and gallium nitride, which outperform traditional materials [4][5] - Although currently unprofitable, the company is expected to experience significant growth in the coming years, with analysts projecting a higher target price than its current valuation [5] - **Impinj (PI)**: - A leader in the RFID space, providing real-time visibility for physical items, with strong recognition in retail and supply chain sectors [6] - Reported Q2 revenues of $102 million, exceeding guidance, and per share earnings of $1.44 for the first half of 2024 [6] - Entered net profitability this year, with expected earnings growth of 30-50% over the next several years, positioning the company for explosive growth [7]

Company Overview - Amkor Technology reported Q2'24 earnings on July 29, 2024, showing strong results but softer-than-expected guidance for Q3'24, with revenue expected at $1.835 billion, up 26% sequentially, driven by advanced packaging [1] - The Q3'24 revenue guidance falls at the low end of analysts' estimates, indicating flat expectations for the OSAT market compared to Q3'23 [1] - Following the earnings release, Amkor's stock experienced significant selling pressure, dropping 18% immediately and continuing to decline, resulting in a total drop of 24% [1] Market Position and Performance - Amkor is positioned in a challenging market, with management indicating a slower-than-expected recovery in the automotive segment, suggesting ongoing destocking phases [2] - The communications segment saw a 17% year-over-year growth in Q2'24, attributed to new chip ramp-ups for the next iPhone release [3] - Management anticipates modest growth in the last two quarters of FY24, with growth rates of 3% and 8% for Q3'24 and Q4'24, respectively [4] Future Outlook - Forecasts for FY25 indicate a potential 23% decline in revenue due to a softening consumer market, but this may be offset by strength in the automotive segment as inventory destocking nears completion [4] - Amkor's utilization rate is currently in the low-70s, with expectations for stronger margins as production ramps up in Q3'24 [4] - The company is expected to see a recovery in EBITDA margins from 17% in FY23 and FY24 to 19% in FY25 due to increased demand for advanced packaging and high bandwidth memory chips [4] Stock Valuation - AMKR shares have experienced a sell-off post-earnings, but this reaction may present a buying opportunity as the growth trajectory appears more favorable in the long term [5][6] - Based on FY25 forecasts, AMKR shares are projected to be priced at $37.62, reflecting an EV/EBITDA multiple of 6.54x [6] - Technical analysis suggests that AMKR shares may decline towards $26 before completing a retracement process, allowing investors to average into a position [6]

Group 1 - Wall Street analysts' recommendations significantly influence investors' decisions regarding Amkor Technology (AMKR), with an average brokerage recommendation (ABR) of 1.71, indicating a consensus between Strong Buy and Buy [1][2] - The current ABR is based on seven brokerage firms, with four Strong Buy and one Buy recommendations, accounting for 57.1% and 14.3% of total recommendations respectively [1] - Despite the positive ABR, studies suggest that brokerage recommendations often lack reliability in predicting stock price increases due to analysts' inherent biases [2][5] Group 2 - The Zacks Rank, a proprietary stock rating tool, is presented as a more reliable indicator of near-term price performance, contrasting with the ABR which is solely based on brokerage recommendations [3][4] - The Zacks Rank is driven by earnings estimate revisions, which are closely correlated with stock price movements, while the ABR may not reflect the most current information [5][6] - For Amkor Technology, the Zacks Consensus Estimate for the current year has decreased by 12.9% to $1.54, leading to a Zacks Rank of 5 (Strong Sell), indicating potential near-term stock price declines [7]

Investment Rating - The report maintains a positive outlook on Amkor, with a revenue guidance for FY2024Q3 set between $1.785 billion and $1.885 billion, indicating a sequential growth of approximately 25.6% [15][20]. Core Insights - Amkor's FY2024Q2 revenue reached $1.461 billion, showing a year-over-year increase of 0.24% and a quarter-over-quarter increase of 7.03%, driven by strong demand for advanced packaging technologies in high-end smartphones and AI solutions [4][20]. - The company successfully expanded its 2.5D packaging capacity in South Korea and received certifications for advanced SAP and memory technologies in Vietnam, supporting RAM production in Q3 [14][20]. - The automotive and industrial markets showed a revenue decline of 2% quarter-over-quarter, attributed to weak downstream demand and prolonged inventory adjustments [8][18]. - The computing market experienced a significant revenue increase of 20% quarter-over-quarter, driven by strong demand for AI devices and new ARM-based PC products [10][18]. Summary by Sections Overall Performance - In FY2024Q2, Amkor achieved a gross profit of $212 million, with a gross margin of 14.5%, slightly down from the previous quarter but up from the previous year [4][20]. - Net income for the quarter was $67 million, reflecting a quarter-over-quarter increase of 11.89% and a year-over-year increase of 4.06% [4][20]. Performance by End Market 1. **Communications Market** - Revenue share was 48%, with a 10% increase quarter-over-quarter, driven by the launch of high-end iOS models [7][11]. 2. **Automotive and Industrial Market** - Revenue share was 20%, with a 2% decrease quarter-over-quarter, primarily due to weak downstream demand [8][18]. 3. **Consumer Market** - Revenue share was 12%, with a 6% decrease quarter-over-quarter, as traditional IoT devices were phased out [9][19]. 4. **Computing Market** - Revenue share was 20%, with a 20% increase quarter-over-quarter, benefiting from strong AI device demand [10][18]. Business Developments - Amkor received a $400 million grant from the U.S. Department of Commerce under the CHIPS Act to build a new facility in Arizona, aimed at supporting advanced packaging and testing for high-performance computing, AI, communications, and automotive markets [14][21]. Q3 Performance Guidance - For FY2024Q3, Amkor's revenue guidance is set at $1.835 billion, with a gross margin forecast between 14% and 16% [15][20]. - Net income guidance ranges from $105 million to $140 million, indicating a significant quarter-over-quarter increase [16][20]. Capital Expenditure - The company anticipates total capital expenditures of approximately $750 million for the year, focusing on expanding 2.5D and SIP advanced packaging capabilities [16][20].

Core Viewpoint - Amkor Technology's Q2'24 results and guidance were below expectations, leading to an 18% drop in shares, but the company is considered to have strong value due to its market position and advanced packaging solutions [1] Company Overview - Amkor Technology is the second largest outsourced assembly and test supplier, focusing on advanced packaging solutions which account for three-quarters of its revenues [2] - The company generated $6.5 billion in revenues for 2023, with a high-single-digit revenue CAGR over recent years [2] - Major customers include Apple, QUALCOMM, Skyworks, NVIDIA, and NXP [2] Q2 Results - In Q2'24, Amkor reported revenues of $1.46 billion, flat year-over-year but exceeding analyst estimates by $10 million [3] - EBITDA was $247 million, with an EPS of $0.27, beating consensus estimates by 5 cents [3] Operating Income and EPS - EPS of $0.27 was 3 cents higher than the previous quarter and 1 cent higher than Q2 last year [4] - Operating margins expanded to 5.0%, with a capex forecast of $750 million for increasing advanced packaging capacity [4] Market Demand - Q2'24 results were driven by strong demand in the Communications and Computing end markets, particularly for advanced packaging in premium tech smartphones and AI solutions [5] - The Communications segment accounts for 48% of revenues, with a strong presence in smartphone applications [6] Manufacturing and Geopolitical Strategy - Amkor established a U.S. manufacturing facility for advanced packaging and is in discussions for up to $400 million in grants under the CHIPS and Science Act [8] - The company is diversifying manufacturing capacity across the U.S. and Vietnam, positioning itself well for semiconductor on-shoring trends [8] Financial Position - At the end of the quarter, Amkor had cash and cash equivalents of $1.5 billion and liquidity of $2.2 billion, with total debt of $1.1 billion, resulting in a Total Debt to EBITDA ratio of 1.0x [9] Valuation and Growth Potential - Analysts project EPS growth from $1.46 in 2023 to $3.20 by 2026, indicating strong long-term growth potential [12] - Amkor's current valuation at 7.6x EV/EBITDA is above its historical average, justified by industry dynamics and on-shoring trends [12]

Financial Performance - Amkor's net sales for Q2 2024 were $1,461.5 million, consistent with Q2 2023, driven by growth in the communications market, while automotive and industrial sales declined [108][112]. - Gross margin increased to 14.5% in Q2 2024 from 12.8% in Q2 2023, primarily due to an extension of the estimated useful life of test equipment and favorable foreign currency exchange rates [108][116]. - Operating income margin rose to 5.6% in Q2 2024, up from 5.2% in Q2 2023, attributed to improved gross margin and recovery of bad debt expense [109]. - The automotive and industrial markets saw a decline of 19% and 12%, respectively, in the first half of 2024 compared to 2023, due to elevated customer inventories and weaker demand [114]. - Communications, the largest end market, grew by 7% in the first half of 2024, primarily driven by strength in premium tier smartphones [114]. Expenses and Investments - Selling, general and administrative expenses increased to $91.3 million in Q2 2024 from $64.9 million in Q2 2023, largely due to startup costs at the Vietnam Facility and higher employee compensation [117]. - Research and development expenses decreased by 13.4% in Q2 2024 compared to Q2 2023, reflecting a shift in asset utilization and projects moving into production [118][119]. - Capital expenditures for the first half of 2024 totaled $262.5 million, a decrease from $282.3 million in the same period of 2023, focusing on advanced packaging and test equipment [109]. - Capital expenditures for the six months ended June 30, 2024, amounted to $262.5 million, with expectations for 2024 capital expenditures to be approximately $750 million [139][140]. Cash Flow and Liquidity - Net cash provided by operating activities was $387.1 million for the first half of 2024, down from $422.6 million in the same period of 2023, mainly due to changes in working capital [109]. - Cash and cash equivalents, along with short-term investments, totaled $1,545.5 million as of June 30, 2024, with $1,354.0 million held offshore by foreign subsidiaries [128]. - Free cash flow for the six months ended June 30, 2024 was $134,781 thousand, down from $145,964 thousand in the prior year [146]. - The company anticipates continuing to pay quarterly cash dividends, having paid a total of $38.8 million in dividends during the six months ended June 30, 2024 [138]. Debt and Interest - The company had debt of $1,103.7 million as of June 30, 2024, with $154.4 million due within 12 months [132]. - The maximum borrowing capacity under the 2022 Singapore Revolver was $600.0 million as of June 30, 2024, with $615.0 million available for future borrowings under revolving credit facilities [131]. - Interest expense for the three months ended June 30, 2024, increased to $15,805 thousand, a rise of 10.1% from $14,354 thousand in the same period of 2023 [121]. - Interest income for the three months ended June 30, 2024, rose to $(17,698) thousand, reflecting a significant increase of 47.3% compared to $(12,019) thousand in the prior year [121]. - Total other income (expense), net, showed a dramatic decline to $(43) thousand for the three months ended June 30, 2024, down from $2,471 thousand in the same period of 2023, representing a change of over 100% [121]. Foreign Currency and Risk Management - Approximately 90% of net sales for the six months ended June 30, 2024 were denominated in U.S. dollars, with the remaining sales primarily in Japanese yen [152]. - A 10% appreciation of foreign currencies against the U.S. dollar would have resulted in a $12 million decrease in income before taxes for the six months ended June 30, 2024 [151]. - The company has foreign currency forward contracts to mitigate foreign currency risk, resulting in a loss of $11.4 million for the six months ended June 30, 2024 [154]. - The company started hedging certain net investment positions in foreign subsidiaries beginning in April 2024 [154]. Interest Rate and Debt Structure - The average interest rate for fixed-rate debt is 4.4%, while the average interest rate for variable-rate debt is 6.1% [157]. - Total fixed rate debt amounts to $616,273 thousand with an average interest rate of 5.9% [157]. - Total variable rate debt is $138,579 thousand with an average interest rate of 6.1% [157]. - Total debt maturities amount to $1,108,545 thousand, with $57,349 thousand due in 2024 [157]. - The company’s total debt structure reflects a significant reliance on fixed rate debt [157].

Financial Data and Key Metrics Changes - Amkor reported Q2 2024 revenue of $1.46 billion, a 7% sequential increase, with EPS of $0.27 [7][15] - Gross profit was $212 million, with a gross margin of 14.5%, slightly down from Q1 due to higher material content [15] - Operating income was $82 million, resulting in an operating income margin of 5.6% [15] - The company expects Q3 revenue to be approximately $1.835 billion, representing a 26% sequential increase [13][16] Business Line Data and Key Metrics Changes - Revenue in the communications end market increased by 10% sequentially, driven by premium tier smartphone launches [8] - Revenue from the automotive and industrial end market decreased by 2% sequentially, attributed to weak demand and inventory corrections [9] - Computing end market revenue increased by 20% sequentially, driven by AI devices and new ARM-based PC product introductions [10] - Consumer end market revenue decreased by 6% sequentially, impacted by the wind down of legacy IoT devices [11] Market Data and Key Metrics Changes - Revenue within the iOS ecosystem saw a larger than seasonal increase due to premium smartphone launches [8] - Android supply chain revenue declined slightly sequentially but showed a strong 20% year-on-year growth [8] - The automotive market is expected to see a gradual recovery, with Q2 2024 identified as the trough [46] Company Strategy and Development Direction - Amkor is focusing on expanding its advanced packaging capacity, particularly for 2.5D technology and advanced SiP [7][19] - The company is establishing a US manufacturing presence for advanced packaging, with a nonbinding memorandum of terms for up to $400 million in grants under the CHIPS and Science Act [8][18] - The strategic pillars include technology leadership, geographic expansion, and focus on industry mega trends [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth drivers for the semiconductor industry, despite current market challenges [14] - The automotive and industrial markets are expected to recover gradually, with a slight improvement anticipated in Q3 [46] - High bandwidth memory constraints may limit revenue growth in the computing segment, but overall demand remains strong [10][37] Other Important Information - The company ended Q2 with $1.5 billion in cash and short-term investments, and total liquidity of $2.2 billion [16] - CapEx forecast for the year remains at $750 million, focused on increasing advanced packaging capacity [17] Q&A Session All Questions and Answers Question: Impact of new facility on margins - The movement from operating expenses to gross margin due to the Vietnam production facility is expected to be less than $10 million, not significantly impacting Q3 margin guidance [22] Question: Recovery in PC and server markets - The general PC market is gradually recovering, particularly in ARM-based PCs, while conventional servers remain weak [26][28] Question: Update on organic interposer technology - Engagement with 5 to 10 customers for organic interposer technology is ongoing, with pilot production expected to ramp into mass production in early 2025 [31] Question: Expectations for automotive and industrial recovery - Q2 2024 is seen as the trough for automotive, with gradual improvements expected in Q3 and Q4 [46] Question: Constraints on high-bandwidth memory - The high-bandwidth memory constraints are related to supply issues, not yield, and are expected to normalize in the coming months [37] Question: Q3 revenue guidance breakdown - Automotive is expected to see mild growth, computing will be in low to mid-single digits, while communications is anticipated to be strong [57] Question: US facility CapEx and capacity - The US facility is expected to contribute less than 10% of total capacity, with significant investments planned for 2026 and 2027 [59][60] Question: AI ARM-based compute revenue - AI compute revenue is currently in the single digits as a percentage of total revenue but is expected to quadruple in 2024 compared to 2023 [62]

Group 1: Earnings Performance - Amkor Technology reported quarterly earnings of $0.27 per share, exceeding the Zacks Consensus Estimate of $0.22 per share, and showing a slight increase from $0.26 per share a year ago, representing an earnings surprise of 22.73% [1] - The company achieved revenues of $1.46 billion for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 0.67%, consistent with year-ago revenues of $1.46 billion [1] - Over the last four quarters, Amkor Technology has consistently surpassed consensus EPS estimates four times and revenue estimates three times [1] Group 2: Stock Performance and Outlook - Amkor Technology shares have increased approximately 14.7% since the beginning of the year, slightly outperforming the S&P 500's gain of 14.5% [2] - The company's future stock performance will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.67 on revenues of $1.86 billion, and for the current fiscal year, it is $1.76 on revenues of $6.55 billion [4] Group 3: Industry Context - The Electronics - Semiconductors industry, to which Amkor Technology belongs, is currently ranked in the top 39% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [5] - Cirrus Logic, another company in the same industry, is expected to report quarterly earnings of $0.62 per share, reflecting a year-over-year decline of 7.5%, with revenues anticipated to be $317.69 million, up 0.2% from the previous year [5][6]