After a Successful IPO, Is It Too Late to Buy GlobalFoundries ...

GlobalFoundries, based in Malta, New York, is the fourth-largest foundry in the world. According to TrendForce, it claims approximately 6% of ... WillHealy (TMFWillHealy) Dec6,2021at8:00AM AuthorBio WillHealyisafreelancefinancialwriterwhohashadalifelonginterestinthestockmarket,alongwithnumerous,less-usefulpursuits.Willpursuedhispassionforwritingafterworkinginthecorporateworldasbothananalystandaninsurancesalesprofessional.Heholdsabachelor'sdegreefromTexasA&MUnivesity,andM.S.fromtheUniversityofNorthTexas,andanMBAinfinanceandstrategyfromtheUniversityofTexasatDallasJindalSchoolofManagement. Follow@HealyWriting KeyPoints AninitialpublicofferingandtheglobalchipshortagehavebroughtGlobalFoundriesaddedattention. Massiverevenuegrowthandaturntoprofitabilitybodewellforthestock. Despitearisingstockprice,itsvaluationlagsthatofTaiwanSemiconductor. GlobalFoundries(NASDAQ:GFS)continuesitssurge.Theone-timefoundrydivisionofAdvancedMicroDevices spunoffasaseparatecompanyin2009andlauncheditsinitialpublicoffering(IPO)inOctober. Now,withthehugeincreaseinthestockprice,investorsmaywonderwhethertheywaitedtoolongtobuy.Let'stakeacloserlookatthissemiconductorstocktoseeiftheinvestmentcaseforthestockstillstands. Imagesource:GettyImages. GlobalFoundriesanditsstock GlobalFoundries,basedinMalta,NewYork,isthefourth-largestfoundryintheworld.AccordingtoTrendForce,itclaimsapproximately6%ofthefoundrymarketandproduceschipsforavarietyofpurposes,includingmobiledevices,PCs,theInternetofThings,andcommunications.ItalsoclaimsAMD,Qualcomm,SkyworksSolutions,andothertechcompaniesassomeofitsclients. Thefoundryindustryhasbenefitedfromasubstantialchipshortage.Tothatend,GlobalFoundrieshaspledgedtospendanadditional$1billiontoexpandcapacity. CompetitorssuchasTaiwanSemiconductor(TSMC)(NYSE:TSM)andUnitedMicroelectronics(NYSE:UMC)havealsoannouncedplanstoboostproduction. Moreover,thecompanyrecentlysignedadealwithFordMotorCompany.Suchadealiscriticalastheglobalchipshortagehashittheautoindustryparticularlyhard,idlingfacilitiesasautomakerswaitonessentialsemiconductors.Theseshortageshaveboostedsemiconductorstocksacrosstheboard,alikelyfactorinthecompany'sdecisiontogopublicfinally.GlobalFoundrieslauncheditsIPOonOct.28,offeringover63millionsharesat$47pershare. Initsshortexistence,GlobalFoundriesstockkeepssoaring.Atjustover$66pershareasofthetimeofthiswriting,thestockhasrisenbyjustover40%injustoveronemonthoftrading. GFSdatabyYCharts Earningsandvaluation Theearningsreportmayhaveconfirmedinvestorinclinationstobidthestockhigher.InitsfirstearningsreleaseonNov.30,GlobalFoundriesreportedthatrevenuecameinat$1.7billion,a56%increasecomparedwiththeyear-agoquarter.In2018,thecompanyembarkedonastrategicchange,hiringnewmanagement,refocusingresearchanddevelopmentandcapitalexpenditures,andbolsteringcustomerrelationships.Nowwiththecurrentlevelofrevenuegrowth,GlobalFoundrieshasbeguntoreapsomeofthebenefitsoftheseinvestments. Therevenueledtoanadjustedquarterlyprofitof$34million,upfromalossof$293millioninthesamequarterlastyear.Limitingtheincreaseinoperatingexpensesto15%helpedthecompanyturnprofitable,evenafterpaying$22millioninincometaxes. GlobalFoundriesbelievestheseincreasescancontinueandhasforecastfourth-quarterrevenueat$1.82billionatthemidpoint.Thecompanyalsopredictsanadjustednetincomebetween$50millionand$70millionintheupcomingquarter.Consequently,GlobalFoundriesstocknowsellsataprice-to-sales(P/S)ratioofabout7.ThisplacesitsvaluationbetweenthatofitslargerTaiwanesecompetitors,withTSMCtradingat12timessalesandUMCsupportinga4P/Sratio. ShouldinvestorsconsiderGlobalFoundries? GlobalFoundrieshaspulledoffasuccessfulIPO,andbothmassiverevenuegrowthandaturntoprofitabilityappeartoconfirminvestorinclinationstobidthestockpricehigher.Also,despiteamoderatesalesmultiple,thelingeringglobalchipshortageshouldbodewellforthestock'snear-termprospects.Assuch,itislikelynottoolatetoGlobalFoundriesasaninvestment. BothGlobalFoundriesanditscompetitorsplansubstantialcapacityexpansions.Thiscouldleadtostrugglesforthestockoncetheshortageabates.However,withrisingdemandacrosstheboardformorechips,itslong-termprospectsappearpromising.  Thisarticlerepresentstheopinionofthewriter,whomaydisagreewiththe“official”recommendationpositionofaMotleyFoolpremiumadvisoryservice.We’remotley!Questioninganinvestingthesis--evenoneofourown--helpsusallthinkcriticallyaboutinvestingandmakedecisionsthathelpusbecomesmarter,happier,andricher. MotleyFoolReturns StockAdvisor S&P500 613% 142% JoinStockAdvisor Discountedoffersareonlyavailabletonewmembers.StockAdvisorwillrenewatthethencurrentlistprice.StockAdvisorlistpriceis$199peryear. StockAdvisorlaunchedinFebruaryof2002.Returnsasof12/19/2021. CalculatedbyTime-WeightedReturn Stocks GFS GLOBALFOUNDRIESInc. NASDAQ:GFS $60.00 down $0.66 (-1.09%) TSM TaiwanSemiconductorManufacturingCompanyLimited NYSE:TSM $116.32 down $0.25 (-0.21%) UMC UnitedMicroelectronicsCorporation NYSE:UMC $11.07 up $0.06 (0.55%) F FordMotorCompany NYSE:F $19.77 down $0.58 (-2.85%) AMD AdvancedMicroDevices,Inc. NASDAQ:AMD $137.75 down $0.89 (-0.64%) QCOM QUALCOMMIncorporated NASDAQ:QCOM $176.80 down $-1.35 (-0.76%) SWKS SkyworksSolutions,Inc. NASDAQ:SWKS $151.70 up $5.31 (3.63%) Averagereturnsofallrecommendationssinceinception.Costbasisandreturnbasedonpreviousmarketdayclose. RelatedArticles WhyGlobalFoundriesSharesRose42%LastMonth WhyGlobalFoundriesStockKeepsSoaring Prev 1 Next GetStartedNow Current