GlobalFoundries Inc.: Balancing Promising Sector Focus with Macroeconomic Challenges and Competitive Pressures

Bank of America Securities analyst Vivek Arya has reiterated their neutral stance on GFS stock, giving a Hold rating on May 3.

Vivek Arya has given his Hold rating due to a combination of factors influencing GlobalFoundries Inc. The company shows promise with its increased focus on communications, data centers, and automotive sectors, moving away from the more volatile mobile and consumer markets. Additionally, GlobalFoundries is working towards expanding its gross margins, aiming for a target of 30% by the end of 2025, and demonstrating operational discipline with flat year-over-year operating expenses.
However, these positive developments are counterbalanced by challenges such as macroeconomic headwinds in the latter half of the year, particularly affecting consumer-related segments like mobile and IoT. The company is also facing a rising tax rate, now projected at 18-19%, higher than the previously modeled 16.5%. Furthermore, despite the expansion in gross margins, the average selling price of wafers is declining, indicating competitive pressures. These factors contribute to a cautious outlook, justifying the Hold rating while maintaining a price objective of $40.

In another report released on May 3, Cantor Fitzgerald also reiterated a Hold rating on the stock with a $40.00 price target.