indie Semiconductor (NASDAQ:INDI): Underpriced and Undervalued?
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indie Semiconductor (NASDAQ:INDI): Underpriced and Undervalued?

Story Highlights

With the projected growing demand for semiconductors in the automotive sector, indie Semiconductor stands out as a promising investment option in a rapidly expanding industry.

The ever-increasing demand for semiconductors in the automotive sector has set the stage for indie Semiconductor (NASDAQ:INDI) to experience substantial growth over the medium to long-term. The intense demand has grown the company’s backlog to over four times its market cap, suggesting it might be underpriced and undervalued.

The stock has already seen a significant increase of roughly 29% in the past month, and it continues to trade at a relative discount, making it an attractive option for investors seeking exposure to this rapidly growing industry.

indie Semiconductor Making Significant Strides

indie Semiconductor creates innovative, high-performance, and energy-efficient technology for Advanced Driver-Assistance Systems (ADAS), user experience, and electrification applications in the Autotech industry. The company’s mixed-signal Systems on a Chip (SoCs) facilitate various edge sensors like Radar, LiDAR, Ultrasound, and Computer Vision.

The company may be a smaller player in the space, but it is making significant strides in gaining market share due to its mixed-signal expertise and singular focus on the automotive industry. As a semiconductor designing company, its competitive advantage lies in its ability to design more integrated, power-efficient, and cost-effective solutions than bigger competitors that cater to several different end markets.

According to recent Bloomberg reporting, the company is exploring strategic options, including a potential sale, as it attracts interest from private equity firms like Silver Lake (ASX:SLR), which is reportedly considering a bid for all outstanding shares of INDI, which could come with a significant premium.

Though the automotive semiconductor market has experienced some recent weakness as auto production has slowed, it is expected to grow from $71.62 billion in 2023 to $140.52 billion by 2028, a CAGR of 14.43% during the forecast period.

indie’s Recent Financial Results & Outlook

The company recently announced Q1 2024 results. Revenue was $52.35 million, a 29% increase from the same period last year, but still short of analyst estimates of $56.17 million. Additionally, the company reported non-GAAP earnings per share of -$0.10, lower than analyst expectations of -$0.08.

Management has issued an optimistic guidance for Q2 2024, with revenue to rise from flat to 5% sequentially with a non-GAAP gross margin expansion. Based on the strength of its product pipeline and a general market recovery, the firm plans to return to high growth mode in the second half of the year and resume its industry-leading growth trajectory into 2025 and beyond.

Is INDI Stock a Buy?

Analysts following the company have been constructive on the stock. KeyBanc analyst John Vinh, a five-star analyst according to Tipranks ratings, recently reiterated an Overweight rating on the shares, though he lowered the price target from $10 to $9, citing broader current weakness in auto demand. However, the analyst still expects 20% growth in 2024, suggesting a meaningful recovery with 30%+ quarter-over-quarter growth in Q3/Q4.

Overall, indie Semiconductor is rated a Strong Buy based on the recommendations and price targets issued by four analysts over the past three months. The average price target for INDI stock is $11.25, representing a potential upside of 51.60% from current levels.

The stock has been highly volatile, though trending upward recently, climbing 5.5% in the past 90 days. It sits in the middle of its 52-week price range of $4.67-$10.85 and continues to show positive price momentum, trading above its 20-day (6.87) and 50-day (6.53) moving averages. The stock trades at a discount to industry peers and its own history, with the current P/S ratio of 4.85x well below the Semiconductor Equipment & Materials industry average of 8.57x and its historical average of 12.77x.

indie Semiconductor in Summary

Despite recent slowdowns in auto production affecting the semiconductor industry, the setting is ripe for indie Semiconductor to capitalize on the projected substantial growth in the sector. The stock continues to gain momentum while trading at a relative discount, making it an attractive option in the burgeoning semiconductor industry.


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