GlobalFoundries stock took a hit on Tuesday as analyst Mehdi Hosseini outlined concerns for the semiconductor company.
Downgrade and Price Target Cut
Susquehanna’s Hosseini downgraded shares to Neutral from Positive and slashed his share price target to $48 from $65. This move caused the stock to drop by 2.3% to $53.36, making it the top decliner in the Nasdaq 100. Other semiconductor stocks were not spared either, with Taiwan Semiconductor down by 1.7%, Applied Materials by 0.1%, and Broadcom by 1.9%.
Lack of Catalysts and Downside Risk
According to Hosseini, while the downside risk to consensus estimates seems limited, the lack of upside potential and absence of any near-term catalysts are expected to weigh negatively on the share price.
Tough Start to the Year
GlobalFoundries has faced challenges since the beginning of the year. Chip demand has been fluctuating, and CEO Thomas Caulfield mentioned during the company’s fourth-quarter earnings call on Feb. 13 that a prolonged high-interest rate environment had triggered a cyclical downturn that was deeper and longer than anticipated within the semiconductor industry.
Industry Reports and Company Concerns
The Semiconductor Industry Association reported that global semiconductor sales in January rose by 15% to $47.6 billion compared to the previous year but fell by 2.1% from December. In February, the association revealed that global semiconductor sales decreased by 8.2% in 2023 versus 2022.
Hosseini also addressed GlobalFoundries’ revenue, content growth, and scaling in his note. The company’s first-quarter financial guidance, released in February, fell below analyst expectations, leading to estimate reductions due to a slow recovery in revenue and doubts about the company’s ability to scale new substrates and products effectively.
In conclusion, GlobalFoundries is navigating a challenging period in the semiconductor market as it strives to overcome obstacles hindering its growth trajectory.