Thursday, July 23, 2015

Hold or Buy Some Shares on Amkor

Currently, Amkor Technology has stock price at $5.13 before the market closed which is completely below our target price $10.12. The trading price is continuously dropping from $9.91 on March 2th.

It is set to report second-quarter 2015 results on Jul 27 after market close. Last quarter, it posted a 20% positive earnings surprise. The results were driven by increased demand for advanced packaging and test technologies. Moreover, the strategic initiatives undertaken by the company led to higher sales and profitability. The company’s efforts to strengthen its cooperation with J-Devices, joint venture in Japan, on many fronts, including sales, operations and R&D, are expected to reap benefits in the to-be-reported quarter. Amkor Technology expects second-quarter earnings per share within 5 cents to 15 cents and revenues in the range of $725 million to $775 million. Nevertheless, management expects the demand to be constrained mainly because of inventory adjustments and other issues at one of their major customers in the mobile device segment. This is likely to affect results in the second quarter.

On July 21th 2015, Amkor Technology, Inc announced plans to expand its state-of-the art assembly and test factory located in China’s Shanghai Free Trade Zone. With this project, Amkor expects to increase its manufacturing facilities in China by 45% to nearly 60,000 square meters of cleanroom space. Demand for assembly and test services is booming in China, particularly for advanced products employing wafer-level, die stacking and package stacking technology. This investment reflects the long term strength of mobile communications business, and the increasingly important role of the Chinese market in the global semiconductor supply chain.

I will suggest to hold on the position and let’s wait to next Monday to see how the second quarter going on. Even though the demand might constrained due to the inventory adjustments and mobile device segment, it seems such adjustment will not last very long. The fall in Amkor price is cyclical, which is usually very low in the summer according to the past. I will suggest to hold the position or even add some shares.

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