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May 08, 2022
With the shortage of semiconductors, chip manufacturers will have no lack of demand in the coming years.
Alpha And Omega Semiconductor Limited (AOSL) is a diversified semiconductor manufacturer serving a variety of end markets. The chips can be found in smartphones, game consoles, TVs, computers, servers, smartwatches and so on. This means that they are not dependent on the performance of a single end market. Therefore the stock is somewhat more resilient to an economic recession.
In the last quarter, AOSL achieved sales of USD 203.24 million, about 20% more than in the same period last year. Earnings per share were $1.34, fully in line with the target of $4-5 earnings per share for the full fiscal year. With a share price of about $38.5, the price/earnings ratio is barely 9, about half the average in the sector. If AOSL starts trading in line with the sector, the price can easily double.
The biggest problem for AOSL at the moment is the production capacity that needs to be increased. The Shaghai site is again suffering from the COVID-19 pandemic and the strict measures that were implemented. At the beginning of April, the factory even had to close for a while. Fortunately, AOSL also has other production facilities. The Oregon plant is even being expanded and that should be reflected in the numbers from early 2023. In the somewhat longer term, Alpha And Omega Semiconductor Limited is therefore aiming for an annual turnover that exceeds one billion dollars.
B.Riley Financial has a buy rating for the stock and a price target of $62, about 60% above the current price. Benchmark Co. is even more optimistic and has a price target of $70. Only Stifel Nicolaus is not bullish and posts a sell advice with a price target of $40.