Globalfoundries Shares Surge as Morgan Stanley Labels Results as 'Most Significant Beat-and-raise Quarter Since IPO'

© Reuters. Globalfoundries (GFS) Shares Surge as Morgan Stanley Labels Results as 'Most Significant Beat-and-raise Quarter Since IPO'

Shares of Globalfoundries (NASDAQ:GFS) are up more than 4% in premarket trading Wednesday after the company reported better-than-expected Q1 results and issued an upbeat Q2 forecast.

GFS reported Q1 adjusted EPS of 42c, topping the consensus estimates of 24c per share. Revenue came in at $1.94 billion, slightly above the estimated $1.9 billion.

The company reported a Q1 adjusted gross margin of 25.3%, while cash and cash equivalents totaled $3.26 billion.

For Q2, GFS expects revenue in the range of $1.96 billion to $1.99 billion, beating the estimated $1.93 billion. Adjusted EBITDA is expected to be between $705 billion and $745 billion, while analysts were looking for $648 million.

“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,” the company said.

Morgan Stanley analyst Joseph Moore said GFS delivered “the most significant beat-and-raise quarter since the IPO as revenues came in slightly higher and costs were substantially lower in cost of sales and opex.”

The analyst hiked the price target to $72.00 per share, up from $65.00.

“This was a very strong quarter with the largest upward revision since the IPO. GFS posted upside in revenue, gross margin, and operating margin, and lower share count driving EPS upside close to 50% for 1H22. While we remain anxious about the smartphone weakness that we are seeing at some customers, the company highlighted strength in higher-end 5G globally and pointed to strong conditions in 2H. Estimates for next year come up 12%, basically neutralizing the multiple compression from our preview,” Moore wrote in a note.

BofA analyst Vivek Arya cut the price target to $75.00 per share, down from $82.00. The analyst commented:

“We believe results can soothe investors’ concerns re: (1) n-t macro slowdown impacting GFS utilization (and in turn shipments/GMs): GFS is fully booked through 2023 and noted fungibility of supply in the event of weakness in any market; (2) smartphone/PC slowdown: PC sales did fall 60% QoQ/YoY in Q1 (will likely be the trough) but were more than offset by strength in data center, comms and IoT. Meanwhile in smartphones, GFS did note some normalization in low-end handset market (low/medium end China shipments -30% YoY), but its focus on transition to feature rich handsets enabled double digit QoQ/YoY growth.”

By Senad Karaahmetovic