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Category: Semiconductors

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Semiconductors

Teradyne’s Weak 2024 Outlook Sparks Concerns, While Advantest Surges Ahead

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Teradyne’s guidance was a big disappointment – they’re forecasting zero growth for 2024, mainly because the first two quarters will be lower but growth will pick up in Q3, Q4. Consensus estimates were for 10% growth in 2024.

Even as end clients like Cloud Service Providers and hyperscalers have bought more semiconductors in the last 6 months, capacity utilization of Teradyne’s testing equipment is still low and new buying of equipment will not be triggered till capacity is used up. This isn’t always a linear relationship, and often there are lags. Second – mobile and PC’s markets have also not increased demand and Teradyne will not get visibility till April for mobile phones demand (read Apple via TSM, which is their largest customer).

Management believes that there is little downside left, and they see utilization rates improving and unit growth in PC’s and smartphones could be a tailwind in the second half. They are still maintaining 2026 estimates of $4.3Mn and over $6 in EPS, but they have a lot of catching up to do.

Contrast this with closest competitor, Advantest (ATEYY), which surprised this morning and increased guidance by 2-3% for the next quarter.. They’re expecting a great second half as well.

I have more Advantest than Teradyne and it’s also done much better for me. If things don’t improve at Teradyne I may just focus on Advantest.

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Semiconductors

Qualcomm Surpasses Q1 Earnings Expectations, Driven by Handset and Automotive Growth

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Qualcomm (NASDAQ:QCOM) shares rose 2.7% in extended trading on Wednesday after the semiconductor company reported fiscal first-quarter results and guidance that topped expectations.

For the period ending Dec. 24, Qualcomm earned $2.75 per share on $9.92B V consensus estimates of $2.37 per share on $9.52B in revenue.

QCT revenue rose 7% year-over-year to $8.4B. 

Revenue from handsets rose 16% year-over-year to $6.69B 

Automotive sales jumped 31% to $598M. – this will be Qualcomm’s biggest growth catalyst.

Sales from IoT plunged 32% to $1.13B.

Licensing revenue fell 4% year-over-year to $1.46B.

Revenue and Earnings Midpoint Guidance is higher at$9.3Bn and $2.3 for the next quarter.

Qualcomm said it expects to earn between $2.20 and $2.40 per share, with revenue forecast between $8.9B and $9.7B. Analysts were expecting $2.25 per share in earnings and $9.28B in revenue.

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Semiconductors

Teradyne (TER) Earnings Preview: BUY at $105-$107 Amid Strong Growth Prospects

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Teradyne reports Q4-23 earnings after the market today.

TSM is Teradyne’s biggest customer for its semiconductor testing equipment, and its bullish guidance of 20-25% growth for 2024 is a big plus for Teradyne; especially after Teradyne’s two years of declining sales and earnings, a lot of which was pandemic indigestion and the slow rollout of the N3 process node from TSM in 2023. However,  N3 production and delivery is going to expand tremendously in 2024 and 2025 and will spur demand for  Teradyne’s testing equipment.

This probably will not be evident in 2023 Q4 results. Q4 expectations are low – only $0.67 in EPS and $675Mn in revenues, and for the full year 2023 are $2.70 in EPS and 2.67Bn in sales.  In my opinion, consensus earnings and revenues for 2024 are too low at $3.64 and $3Bn in sales – instead,  *I believe earnings will be between $4 to $4.25, and sales over $3.2Bn*. Teradyne has good operating leverage and earnings should grow to over $6 by 2025. *That’s over 40% earnings growth for the next two years.*

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Semiconductors

Super Micro Computer (SMCI) Earnings Report: Key Indicator for AMD and Nvidia’s Performance

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Super Micro Computer (SMCI) reports this evening, after market close. If you recall, Super Micro had shot up from $300 just two weeks back to the $490 it is now, because of its revised guidance  – it too had its Nvidia moment!

Second-quarter anticipated sales now expected to be between $3.60 billion and $3.65 billion, which was a significant increase from the previous forecast of $2.70 billion to $2.90 billion. The company anticipates an improvement in adjusted earnings to the range of $5.40 to $5.55, up from the initial estimate of $4.40 to $4.48. 

This new guidance handily surpasses analysts’ expectations for the second quarter, set at $2.84 billion in revenue and earnings per share of $4.55. At midpoints, these revised projections indicate a 29% rise in revenue and a 24% increase in non-GAAP net income compared to Super Micro Computer’s earlier guidance.

I’m more interested in SMCI’s results as a good indicator for AMD and Nvidia (Nvidia), since they are the largest supplier for scalable rack systems for the data center GPU’s. If they overshoot even this revised estimate, I would look at AMD more closely.

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Semiconductors

Qualcomm (QCOM): An Underappreciated GARP Opportunity in Wireless Technology

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Qualcomm (QCOM) $137.50

Qualcomm is an underappreciated GARP (Growth At A Reasonable Price). 

Apple stays on as a handset customer for an extra two years than originally planned, till FY 2027. Clearly, developing in-house modems is an enormously difficult undertaking and even the mighty Apple is still struggling to achieve the same levels of expertise and product quality that Qualcomm provides.

Qualcomm’s crown jewels of extensive, essential patents for wireless networks, such as a near-monopoly in 3G wireless networks, a large share of 4G patents, which contributed enough innovation to warrant earning royalties on virtually all 4G devices and a good portion of essential patents with 5G – ensure a lucrative stream of royalty revenue from most cell phones. 

The crown jewels continue to bolster and monetize the business. 

Qualcomm’s auto segment should power growth for the next decade.

Qualcomm has a large auto pipeline of $30Bn through 2030, larger than Nvidia’s $14Bn and Mobileye’s $22Bn. I expect the auto segment to grow from $1.9Bn to $4.3Bn by FY 2026, a CAGR of 33% in the next 3 years. 

Qualcomm’s main strengths are:

  • Its connectivity, from its decades of experience in the cell phone industry.
  • The one-stop shop integrating ADAS, Infotainment, Car to Cloud services, and connectivity.
  • Its massive capacity to scale and handle the complexity needed to manage different systems, stacks, and vendors.
  • Building a better platform at scale – Qualcomm would be the digital chassis for traditional ICE automakers 
  • Unlike Mobil Eye, Qualcomm could take market share by being more flexible and building heterogeneous SoCs the way they did in phones and IoT.

Given the emphasis on technology and the high growth, Mobileye, Qualcomm’s largest competitor is valued at a whopping 16x revenues. I don’t believe the markets are valuing the strength of Qualcomm’s $30Bn pipeline and 33% growth correctly and see this as an opportunity to buy.

The Company’s lucrative treasure trove of patents in connectivity should continue to ensure high-margin revenues for a long time.

Its Snapdragon technology in partnership with Microsoft can find opportunities in the PC space.

The auto industry, as it moves towards autonomous driving, is an extremely difficult one to work in with its maze of regulations, emphasis on safety, adherence to stringent quality standards, and the time from pipeline to production, which sometimes stretches up to 7 years. ICE (Internal Combustion Engine) automakers have to make a paradigm shift embracing technology as the main driver and not looking at digitization partners as parts suppliers.

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Semiconductors

indie Semiconductor (INDI): A Compelling Buy in the Auto-Tech Growth Sector

indie Semiconductor (INDI) $7.35

BUY 

indie Semiconductor is a compelling growth story in the auto-tech industry, with a decade of secular growth ahead.

It has durable competitive advantages of providing agnostic and holistic solutions to the ADAS (Advanced Driver Assistance Systems) segment of the auto-tech industry. As cars progress towards becoming computers on wheels, there are myriad ADAS solutions for traditional internal combustion makers to pure tech companies making electronics and autonomous vehicles.  The industry is fragmented, finding its feet, thus having agnostic solutions is a big plus. 

Another plus is that it’s run by a solid team of industry veterans with decades of production experience and deep roots in the auto-tech industry. Auto production is deeply regulated for safety standards, the sales and production cycles take years from design to production, and having veterans instead of tech-whiz kids is a big competitive advantage. 

Also, indie’s small size (just $350Mn in sales in 2024) makes it nimble and well-positioned to take on difficult projects deemed unprofitable by large, rigid, complacent auto parts manufacturers.

indie’s pipeline has leapfrogged to $6.3Bn from $4.3Bn leading to forecasted revenue of $1Bn for 2028, about 5x 2023’s revenue. That was the clincher for me; its current market cap is only 1.4Bn, just 4x 2024 sales. 

A COMPELLING BARGAIN.