Tower (TSEM) AI Stock Analysis

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Tower

(NASDAQ:TSEM)

Rating:74Outperform

Price Target:

$46.00

▲(10.95%Upside)

Tower Semiconductor's strong earnings call and technical analysis are the main contributors to its overall stock score, offsetting concerns about valuation and financial performance volatility. Strategic investments and robust market demand indicate potential for future growth, despite industry challenges.

Positive Factors

Financial Performance

Tower's bottom line of $0.45 handily beat the estimate and consensus by $0.07, benefiting from solid expense control and higher earned interest on its growing cash balance.

Market Position

Tower maintains a high market share in SiGe and SiPho technologies, engaging with top optical integrators and showcasing industry leadership with new developments.

Revenue Growth

Revenue guidance for Q2 is set at $372 million, ahead of the estimate and the Street consensus, showing continuing demand momentum.

Negative Factors

Project Development

Adani Group was not satisfied with the level of financial contribution Tower was willing to commit to the partnership.

Strategic Partnerships

Adani Group paused discussions with Tower Semiconductor on the proposed $10 billion chip fab project due to strategic and commercial concerns.

Tower (TSEM) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$4.49B

Dividend YieldN/A

Average Volume (3M)459.25K

Price to Earnings (P/E)22.2

Beta (1Y)1.59

Revenue Growth5.22%

EPS Growth-58.99%

CountryUS

Employees5,613

SectorTechnology

Sector Strength84

IndustrySemiconductors

Share Statistics

EPS (TTM)0.45

Shares Outstanding111,756,620

10 Day Avg. Volume338,566

30 Day Avg. Volume459,247

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)1.74

Price to Sales (P/S)0.00

P/FCF Ratio272.09

Enterprise Value/Market Cap1.01

Enterprise Value/Revenue0.81

Enterprise Value/Gross Profit13.38

Enterprise Value/Ebitda2.57

Forecast

1Y Price Target

$60.00

Price Target Upside44.72% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering3

Tower Business Overview & Revenue Model

Company DescriptionTower Semiconductor Ltd., an independent semiconductor foundry, manufactures and markets analog intensive mixed-signal semiconductor devices in the United States, Japan, other Asia countries, and Europe. It provides various customizable process technologies, including SiGe, BiCMOS, mixed signal/CMOS, RF CMOS, CMOS image sensor, integrated power management, and MEMS. The company also offers wafer fabrication services and design enablement platform for design cycle, as well as transfer optimization and development process services to integrated device manufacturers and fabless companies. It serves various markets, such as consumer electronics, personal computers, communications, automotive, industrial, aerospace, military, and medical device products. The company was incorporated in 1993 and is headquartered in Migdal Haemek, Israel.

How the Company Makes MoneyTower Semiconductor generates revenue primarily through its foundry services, which involve manufacturing custom-designed semiconductor wafers based on clients' specifications. The company operates multiple fabrication plants that produce these wafers in high volumes, catering to a wide array of industries. Revenue streams include long-term contracts with semiconductor companies, which leverage Tower's advanced manufacturing capabilities and technology platforms. Additionally, the company engages in strategic partnerships and collaborations, providing technology licensing and joint development agreements that further enhance its earnings potential. Tower's ability to offer specialized and advanced technology solutions positions it competitively in the semiconductor market, contributing significantly to its revenue.

Tower Earnings Call Summary

Earnings Call Date:May 14, 2025

(Q1-2025)

% Change Since: 3.42%|

Next Earnings Date:Aug 05, 2025

Earnings Call Sentiment Neutral

The earnings call highlights strong revenue growth and strategic investments driving future opportunities. However, challenges in the RF Mobile business, market uncertainties due to tariffs, and competitive pressures in China present notable concerns.

Q1-2025 Updates

Positive Updates

Strong Revenue and Profit Growth

Tower Semiconductor reported a quarterly revenue of $358 million, representing a 9% year-over-year increase. Net profit for the first quarter was $40 million.

RF Infrastructure Growth

RF Infrastructure grew from 14% to 22% of total revenue year-over-year. This growth is driven by datacenter and AI expansions, with record revenue levels for silicon photonics and silicon germanium technologies.

New Technology Developments

Tower announced new technology enabling Innolight to reduce lasers per 800G module, along with a 400 Gbps modulator performance with OpenLight, enhancing future product generations.

Power Management and Market Rebound

Tower is experiencing a strong rebound in Power Management, with high voltage platforms serving automotive, industrial, and consumer applications, and a ramp in machine vision sensor business.

Financial Stability and Strategic Investments

Tower's balance sheet remains strong with a current assets ratio of 7x and shareholders' equity of $2.7 billion. Strategic investments in global fabs are ongoing, targeting $2.7 billion in annual revenue.

Negative Updates

Challenges in RF Mobile Business

RF Mobile business faces challenges with a flat to minimal growth forecast in the handset market. The business is affected by inventory burn-offs and increased competition from Chinese manufacturers.

Tariff and Policy Concerns

Market uncertainty due to tariffs and related policy shifts may impact end markets, although Tower's global manufacturing flexibility helps mitigate direct effects.

Decreased Net Profit Compared to Previous Year

Net profit for Q1 2024 was $45 million, higher than the current quarter's $40 million, which included a non-recurring income tax benefit in the previous year.

Impact of Chinese Regulatory Pressures

Chinese regulatory approval process for the Intel acquisition potentially led to pressure on a major customer to source more product domestically, affecting Tower's market share.

Company Guidance

During the Tower Semiconductor earnings call for the first quarter of 2025, the company reported a quarterly revenue of $358 million and a net profit of $40 million. The CEO, Russell Ellwanger, provided guidance for the second quarter, projecting a midpoint revenue of $372 million, with an expected 5% fluctuation. The company anticipates sequential revenue growth throughout 2025, with accelerated growth in the latter half of the year as their multi-fab capacity investments complete customer qualifications and ramp into production. Key growth areas highlighted include RF Infrastructure, which increased from 14% to 22% of total revenue year-over-year, and new markets like Envelope Tracker in the Power Management sector. The company also emphasized the strong market demand for silicon photonics and silicon germanium technologies, projecting continued growth driven by datacenter and AI expansions. The CFO, Oren Shirazi, reported a strong balance sheet, with assets totaling $3.1 billion and a shareholders’ equity of $2.7 billion. The company has committed significant capital to strategic investments, including $300 million for their New Mexico fab and $500 million for an Italy fab partnership, with expectations to reach $2.7 billion in annual revenue at full capacity.

Tower Financial Statement Overview

Summary

Tower Semiconductor exhibits strong operational efficiency with a stable balance sheet and conservative leverage. However, inconsistent revenue growth and volatility in free cash flow suggest areas for improvement, although the overall financial health remains solid.

Income Statement

Positive

Tower's gross profit margin and EBIT margin have shown stability over the years, with a recent dip in net income affecting net profit margin. Revenue growth rate has been inconsistent, indicating potential challenges in maintaining steady growth. The EBITDA margin remains robust, highlighting strong operational efficiency.

Balance Sheet

Positive

The company's debt-to-equity ratio is low, suggesting a conservative leverage strategy which enhances financial stability. Return on Equity has decreased due to a decline in net income. The equity ratio indicates a solid financial position with a higher proportion of equity financing.

Cash Flow

Positive

Operating cash flow is strong, yet the free cash flow has experienced volatility mainly due to significant capital expenditures. The free cash flow to net income ratio suggests challenges in converting profit into free cash flow.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.44B	1.42B	1.68B	1.51B	1.27B
	Gross Profit
339.44M	353.52M	466.31M	329.12M	233.32M
	EBIT
191.31M	547.26M	311.67M	166.51M	91.03M
	EBITDA
451.32M	851.12M	594.75M	437.22M	331.56M
	Net Income Common Stockholders
207.86M	518.49M	264.57M	150.01M	82.30M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.22B	1.24B	1.01B	764.65M	710.88M
	Total Assets
3.08B	2.92B	2.55B	2.23B	2.09B
	Total Debt
180.81M	231.56M	272.34M	314.84M	390.28M
	Net Debt
-91.08M	-29.10M	-68.42M	103.91M	178.59M
	Total Liabilities
440.31M	491.48M	659.07M	615.85M	639.25M
	Stockholders Equity
2.65B	2.43B	1.90B	1.62B	1.46B
Cash Flow		Free Cash Flow
12.53M	232.06M	316.28M	107.48M	-37.09M
	Operating Cash Flow
448.68M	676.56M	529.82M	421.29M	276.56M
	Investing Cash Flow
-400.24M	-720.85M	-329.45M	-338.94M	-363.61M
	Financing Cash Flow
-32.45M	-30.41M	-66.65M	-76.86M	-61.19M

Tower Technical Analysis

Technical Analysis Sentiment

Positive

Last Price41.46

Price Trends

50DMA

37.52

Positive

100DMA

41.04

Positive

200DMA

43.45

Negative

Market Momentum

MACD

0.82

Positive

RSI

57.44

Neutral

STOCH

50.61

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSEM, the sentiment is Positive. The current price of 41.46 is above the 20-day moving average (MA) of 40.93, above the 50-day MA of 37.52, and below the 200-day MA of 43.45, indicating a neutral trend. The MACD of 0.82 indicates Positive momentum. The RSI at 57.44 is Neutral, neither overbought nor oversold. The STOCH value of 50.61 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSEM.

Tower Risk Analysis

Tower disclosed 43 risk factors in its most recent earnings report. Tower reported the most risks in the “Production” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Tower Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
UMC	78 Outperform	$18.87B	13.84	11.65%	4.59%	2.22%	-22.39%
NXPI	77 Outperform	$52.47B	22.39	26.02%	1.95%	-7.21%	-15.29%
TSEM	74 Outperform	$4.49B	22.25	7.88%	―	5.22%	-58.99%
STM	71 Outperform	$25.65B	24.24	6.33%	1.07%	-25.35%	-70.00%
ASX	70 Outperform	$20.18B	19.81	11.47%	2.37%	1.32%	4.86%
Sector *	62 Neutral	$11.80B	10.31	-7.45%	2.91%	7.43%	-7.78%
GFS	60 Neutral	$20.86B	28.15	-1.69%	―	-4.42%	-120.96%

* Technology Sector Average

Performance Comparison

TSEM

Tower

41.46

2.96

7.69%

ASX

ASE Technology Holding Co

9.90

-1.00

-9.17%

NXPI

NXP Semiconductors

213.08

-58.98

-21.68%

STM

STMicroelectronics

29.60

-14.26

-32.51%

UMC

United Micro

7.76

-0.51

-6.17%

GFS

GlobalFoundries Inc

38.39

-9.28

-19.47%

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.