Back to top

Image: Bigstock

Bear of the Day: GlobalFoundries (GFS)

Read MoreHide Full Article

When I last wrote about GlobalFoundries ((GFS - Free Report) ) in early July, as shares were trading near $65, I summed up that this "US-based Semi fabricator fights to draw new business in a global nanometer AI-chip war."

Well after their Q4 report two weeks ago, the story has not improved, with continued year-over-year declines in sales and profits and weaker guidance for both that has dropped the stock back into the cellar of the Zacks Rank.

My July article gives a good overview of where GlobalFoundries fits in the semiconductor ecosystem and what downward trends were already in motion last spring.

In that piece I explain what this $29 billion "chip builder" with $7 billion in revenues is relied on for. I also describe the landscape of "trailing node" and why GFS remains a key semiconductor player for many different types of industrial manufacturers.

Read that July piece to grasp the context of their long-term business and opportunities, even as the latest report signals more weakness ahead in the short term.

Metrics, Segments, and Guidance

GlobalFoundries delivered adjusted earnings of 64 cents per share in fourth-quarter 2023, beating the Zacks Consensus Estimate by 8.5%. However, the bottom line declined 56% on a year-over-year basis.

Revenues of $1.85 million topped the Zacks Consensus Estimate by 0.2%. However, the top line dipped 12% year over year.

Weakness across the smart mobile devices, communications infrastructure and datacenter, home and industrial IoT, and personal computing end-markets was a major concern.

Wafer shipments decreased 5% year over year to $552 million in the reported quarter, while stronger momentum in the automotive end market was a positive.

End-Market Details

Smart Mobile Devices: Revenues generated from the market fell 7% year over year to $765 million (41% of the total revenues).

Communications Infrastructure & Datacenter: Revenues from the market decreased 63% year over year to $144 million (8% of the total revenues) in the reported quarter.

Home and Industrial IoT: Revenues from the market were $322 million (17% of the total revenues), down 23% from the year-ago quarter.

Automotive: Revenues from the market were $318 million (17% of the total revenues), up 177% from the year-ago quarter.

Personal Computing: Revenues from the market were $84 million (5% of the total revenues), down 27% from the year-ago quarter.

Non-Wafer and Corporate Other Revenue: Revenues from this category were $221 million (12% of the total revenues), down 10% from the year-ago quarter.

GFS Guidance

For first-quarter 2024, GlobalFoundries expects revenues between $1.50 billion and $1.54 million. The Zacks Consensus Estimate for the same is pegged at $1.75 billion.

Gross profit is expected to be $329-371 million, with a gross margin of 23% at the mid-point.

Adjusted operating profit is anticipated between $120 million and $180 million, with an operating margin of 9.9% at the mid-point.

The company anticipates adjusted earnings per share between 18 cents and 28 cents. The Zacks Consensus Estimate for the same period was pegged at 45 cents.

In response to this company guidance, Wall Street semiconductor analysts lowered the Zacks Consensus for the 2024 topline to $6.77 billion, representing an 8.44% annual decline.

And the full-year EPS consensus dropped a whopping 41.5% from $2.24 to $1.31.

Bottom line on GFS: The continuing decline in growth may soon trough this year in the midst of historic AI-fueled demand for chips, but right now the stock will probably be stagnant given its valuation and trailing node specialties. The Zacks Rank will let you know about a possible turnaround.

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

GlobalFoundries Inc. (GFS) - free report >>

Published in