GlobalFoundries Inc. (NASDAQ: GFS) is a well-known semiconductor foundry that has expertise in making integrated circuits, including network processors, microcontrollers, microprocessors, baseband processors, and mobile application processors.
Founded in 2009, the company has grown impressively on the back of partnerships, buyouts, and project expansions. GlobalFoundries became a member of the Nasdaq in October 2021. The company concluded the initial public offerings (IPO) of its 55 million shares in November last year.
A quick recap of the company’s IPO is desirable at this juncture. Out of its 55 million shares, GlobalFoundries offered 30.25 million shares, and the remaining 24.75 million shares were extended by Mubadala Investment Company PJSC (a shareholder of GlobalFoundries) to the public.
The IPO was a success. The company bagged $47 for every share offered to the public, which was at the high-end of the initial price band of $42-$47 per share. The par value was $0.02 per share. From this offering, GFS raised approximately $2.6 billion from the capital market.
According to TipRanks, the Street is optimistic about GFS’ growth prospects, which is evident from a Strong Buy consensus rating based on eight Buys and one Hold. GFS’ average price target of $71.33 suggests 47.04% upside potential from the current level.
Apart from a successful IPO, other factors that might have added to the company’s investment appeal are discussed below.
Share Price & Market Capitalization
GlobalFoundries’ first trading day on the exchange was October 28, 2021. The opening price on this day was $47.01 per share, one cent above the IPO price of $47 per share, and the highest and lowest levels were $48 and $44.48 per share, respectively. Shares closed the trading session at $46.40, down 1.3% from the IPO price.
Since its listing, shares of GlobalFoundries have grown 4.6% to close at $48.51 on Monday (June 13, 2022). Presently, GFS’ market capitalization stands at $25.8 billion.
Important Milestones
Following its listing, the company’s financial performance has been impressive. It delivered better-than-expected results in the last two quarters of 2021 and the first quarter of 2022 (with an earnings beat of 75%).
Apart from releasing Q1 2022 results in May, the company announced the opening of GF Labs (to help boost its technological capabilities) and launched the GF Connex portfolio (equipped with technology solutions related to radio frequency).
Meanwhile, the company entered into a chip supply agreement with Motorola Solutions, Inc. (NYSE: MSI) and collaborated with the U.S. Department of Defense to provide security-related chips.
In December 2021, GFS extended its association with Advanced Micro Devices, Inc. (NASDAQ: AMD), assuring the latter with a continued supply of wafers/chips.
In November 2021, GFS strengthened its ties with Ford Motor Company (NYSE: F) for supplying chips used in the manufacturing of vehicles and working on R&D projects in the field.
Growth Drivers & Projections
GlobalFoundries is well-positioned to leverage the growing demand for semiconductors across multiple industries. Its more than 200 customers (at the end of 2021), including well-known names in automobile, telecommunications, and other fields, are reflective of solid demand for its products.
Technological expertise, solid manufacturing capabilities, patent rights, a talented workforce, and a healthy cash position also enhance GFS’ competitive appeal. The company is also effectively dealing with the prevalent supply-chain issues in the industry.
In May 2022, the CEO of GlobalFoundries, Dr. Thomas Caulfield, said, “Despite global supply chain challenges, the GF team continues to execute to plan, and we remain on track to deliver a strong year of growth and profitability.”
For the second quarter of 2022, the company anticipates revenues to be within the $1,955-$1,985 million range and the adjusted earnings between $0.43 and $0.48 per share. The projections are higher than $1,940 million of revenues and $0.42 per share of adjusted earnings recorded in Q1 2022.
Sentiments for the Stock
Eight days ago, Christopher Danely of Citigroup maintained a Buy rating on GFS while increasing the price target to $70 (44.3% upside potential) from $65. The analyst is happy about GlobalFoundries’ margin upside potential.
As per TipRanks, financial bloggers are 100% Bullish on GFS, compared with the sector average of 66%. Also, the hedge fund confidence signal is Very Positive for the company. In the last quarter, hedge funds on TipRanks increased their exposure to the company by 7.7 million shares.
Conclusion
Investors seeking exposure in the semiconductor space may find GlobalFoundries an attractive investment option. Solid growth prospects, supported by healthy demand, manufacturing capabilities, cash position and a solid customer base, stand the company in good stead.
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