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Tower Semiconductor (TSEM)
NASDAQ:TSEM
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Tower
(NASDAQ:TSEM)
Rating:76Outperform
Price Target:
$54.00
▲(15.21% Upside)
Positive Factors
AI Data Center and RF Mobile Growth
Tower Semiconductor's AI Data Center and RF Mobile businesses are experiencing strong growth, contributing to a solid financial quarter and positive outlook.
Power IC Revenue Increase
The company's Power IC revenue increased by 20% annually, driven by its association with Apple's baseband modem ramp, signaling potential for continued success.
RF Infrastructure Segment Growth
The RF Infrastructure segment grew 72% annually during the quarter, with notable growth in Silicon Photonics and Silicon Germanium Optical Transceiver revenue.
Negative Factors
Power IC Revenue Dependence
Tower Semiconductor's Power IC revenue grew significantly by 97% annually, driven by the ramp of its Envelope Tracking win.
RF Infrastructure Growth Challenges
The RF Infrastructure segment showed significant growth, with the Silicon Photonics business growing more than 170% year-over-year and Silicon Germanium Optical Transceiver revenue increasing by about 15%.
RF-SOI Switch Business Recovery
Tower's RF-SOI switch business is recovering from previous inventory challenges and is expected to continue growing in the coming quarters.
Tower (TSEM) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$5.28B
Dividend YieldN/A
Average Volume (3M)856.30K
Price to Earnings (P/E)26.9
Beta (1Y)1.64
Revenue Growth7.18%
EPS Growth-60.59%
CountryUS
Employees5,613
SectorTechnology
Sector Strength94
IndustrySemiconductors
Share Statistics
EPS (TTM)0.50
Shares Outstanding111,756,620
10 Day Avg. Volume1,083,721
30 Day Avg. Volume856,302
Financial Highlights & Ratios
PEG Ratio-0.46
Price to Book (P/B)2.16
Price to Sales (P/S)3.99
P/FCF Ratio456.98
Enterprise Value/Market Cap0.73
Enterprise Value/Revenue2.61
Enterprise Value/Gross Profit11.65
Enterprise Value/Ebitda7.95
Forecast
1Y Price Target
$63.81Price Target Upside36.14% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering6
Tower Business Overview & Revenue Model
Company DescriptionTower Semiconductor Ltd. (TSEM) is a leading foundry dedicated to manufacturing analog integrated circuits (ICs) and specialized semiconductor solutions. The company operates in various sectors, including automotive, consumer electronics, medical devices, and industrial applications. Tower offers a diverse range of products, including CMOS image sensors, RF and high-voltage ICs, and power management solutions, leveraging its advanced manufacturing technologies and expertise in process design to serve a global customer base.
How the Company Makes MoneyTower Semiconductor generates revenue primarily through its foundry services, which involve the fabrication of semiconductor devices for various customers. The company typically charges its clients for the manufacturing of ICs based on the complexity and volume of the orders. Key revenue streams include contracts with major semiconductor companies and partnerships with firms requiring specialized manufacturing capabilities. Additionally, Tower benefits from long-term agreements with clients, which provide revenue stability and predictability. The company also engages in joint ventures and collaborations, enabling it to expand its technological offerings and access new markets, further contributing to its earnings.
Tower Earnings Call Summary
Earnings Call Date:Aug 04, 2025
(Q2-2025)
| % Change Since: 4.93%|
Next Earnings Date:Nov 17, 2025
Earnings Call Sentiment Positive
Tower Semiconductor's second quarter 2025 earnings call highlighted strong revenue and profit growth, driven by significant advancements in RF infrastructure and Silicon Photonics. Strategic investments are expected to further bolster future growth. Utilization challenges and currency risks were noted but are being managed. Overall, the sentiment is positive with substantial forward-looking growth expectations.Q2-2025 Updates
Positive Updates
Strong Revenue and Profit Growth
Tower reported a second quarter 2025 revenue of $372 million, reflecting a 6% year-over-year increase and a 4% quarter-over-quarter increase. Net profit for the quarter was $47 million, up by $7 million from the previous quarter.
RF Infrastructure Growth
The RF infrastructure business represented 25% of corporate revenues, with over $90 million in revenue, up from 14% in the same period of 2024. This growth is attributed to data center and AI expansions utilizing Silicon Photonics and Silicon Germanium technologies.
Silicon Photonics Expansion
In the first half of 2025, Tower moved 5 times more Silicon Photonics products from preproduction to production compared to the same period in 2024. They are also expanding market opportunities with a new 300-mm Silicon Photonics technology targeting the receive function in optical transceiver modules.
Increased Demand in Sensor and Display Markets
Tower expects a 20% revenue increase in the second half of 2025 for sensors and displays, driven by machine vision market growth and new activities with automotive and OLED on silicon suppliers.
Strategic CapEx Investments
Tower has committed to significant capital expenditures to expand capacity, including $300 million for New Mexico fab equipment, $500 million for Italy fab, and $350 million for SiPho and 5G business expansion.
Negative Updates
Utilization Challenges
Fab 2 in Israel and Fab 9 in Texas operated at about 60% utilization while repurposing tools for Silicon Germanium and Silicon Photonics manufacturing.
Hedging and Currency Risks
Currency fluctuations and hedging activities, particularly with the yen, shekel, and euro, pose financial risks, although mitigated through zero-cost cylinder transactions.
Company Guidance
During Tower Semiconductor's second quarter 2025 earnings call, the company reported revenues of $372 million and a net profit of $46.6 million. For the third quarter, they projected revenues of $395 million, with a potential fourth-quarter increase of at least $40 million over the third quarter. The company emphasized strong growth in its RF infrastructure business, which accounted for 25% of corporate revenues, amounting to over $90 million. They also highlighted significant progress in Silicon Photonics and Silicon Germanium technologies, with a fivefold increase in silicon photonics products moving from preproduction to production compared to the previous year. Utilization rates varied across their facilities, with Fab 2 and Fab 9 operating at about 60%, while Fab 7 exceeded the 85% model. They continue to invest in capacity and R&D, aligning with customer demand forecasts, and aim to maintain their leadership in the optical transceiver market.Tower Financial Statement Overview
Summary
Tower exhibits strong financial performance with robust revenue growth and profitability. The balance sheet is stable, showing low leverage and high equity. However, the negative free cash flow needs attention.Income Statement
Tower's revenue has shown consistent growth with a TTM (Trailing-Twelve-Months) revenue of $1.47 billion, up from previous years. Gross profit margin is healthy at 23.17%, while the net profit margin is robust at 13.86%. The company demonstrates a strong EBIT margin at 12.54% and an EBITDA margin of 32.28%, indicating efficient operational management. However, there's a slight decline in EBIT over the latest period, which warrants monitoring.78
Positive
Balance Sheet
The balance sheet reflects a strong equity position with stockholders' equity at $2.72 billion, which constitutes 87.35% of total assets, signaling financial stability. The debt-to-equity ratio is low at 0.06, indicating minimal leverage. Return on equity is solid at 7.49%, highlighting effective use of equity to generate profits. Overall, the company is in a stable financial position with low risk from leverage.82
Very Positive
Cash Flow
Tower's cash flow shows a decrease in free cash flow to -$12.48 million in the TTM, despite a strong operating cash flow of $432.57 million. The operating cash flow to net income ratio is 2.13, which suggests good cash generation relative to net income. However, the negative free cash flow and declining trend present a potential risk that needs addressing.70
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.49B | 1.44B | 1.42B | 1.68B | 1.51B | 1.27B |
| Gross Profit | 333.11M | 339.44M | 353.52M | 466.31M | 329.12M | 233.32M |
| EBITDA | 487.97M | 451.32M | 851.12M | 594.75M | 437.22M | 331.56M |
| Net Income | 196.48M | 207.86M | 518.49M | 264.57M | 150.01M | 82.30M |
Balance Sheet | ||||||
| Total Assets | 3.20B | 3.08B | 2.92B | 2.55B | 2.23B | 2.09B |
| Cash, Cash Equivalents and Short-Term Investments | 1.21B | 1.22B | 1.24B | 1.01B | 764.65M | 710.88M |
| Total Debt | 176.10M | 180.81M | 231.56M | 272.34M | 314.84M | 390.28M |
| Total Liabilities | 428.97M | 440.31M | 491.48M | 659.07M | 615.85M | 639.25M |
| Stockholders Equity | 2.77B | 2.65B | 2.43B | 1.90B | 1.62B | 1.46B |
Cash Flow | ||||||
| Free Cash Flow | -1.06M | 12.53M | 232.06M | 316.28M | 107.48M | -37.09M |
| Operating Cash Flow | 443.12M | 448.68M | 676.56M | 529.82M | 421.29M | 276.56M |
| Investing Cash Flow | -412.55M | -400.24M | -720.85M | -329.45M | -338.94M | -363.61M |
| Financing Cash Flow | -35.48M | -32.45M | -30.41M | -66.65M | -76.86M | -61.19M |
Tower Technical Analysis
Neutral
46.87
Price Trends
44.87
Positive
41.10
Positive
43.93
Positive
Market Momentum
0.52
Positive
50.48
Neutral
32.01
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSEM, the sentiment is Neutral. The current price of 46.87 is below the 20-day moving average (MA) of 47.73, above the 50-day MA of 44.87, and above the 200-day MA of 43.93, indicating a neutral trend. The MACD of 0.52 indicates Positive momentum. The RSI at 50.48 is Neutral, neither overbought nor oversold. The STOCH value of 32.01 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 |
|---|---|---|---|---|---|---|---|
76 Outperform | $5.28B | 26.94 | 7.41% | ― | 7.18% | -60.59% | |
74 Outperform | $58.37B | 27.36 | 23.11% | 1.77% | -7.53% | -21.88% | |
71 Outperform | $17.06B | 13.91 | 10.98% | 7.02% | 5.46% | -26.72% | |
66 Neutral | $21.44B | 20.26 | 10.97% | 3.62% | 4.86% | 6.44% | |
62 Neutral | £500.82M | 27.12 | 0.85% | 2.82% | 3.88% | -21.07% | |
60 Neutral | $23.22B | 37.72 | 3.72% | 1.18% | -22.97% | -78.58% | |
51 Neutral | $18.30B | 28.15 | -1.01% | ― | -0.65% | -114.26% |
* Technology Sector Average
Performance Comparison
TSEM
Tower
46.87
6.51
16.13%
ASX
ASE Technology Holding Co
9.83
-0.02
-0.20%
NXPI
NXP Semiconductors
228.78
-24.72
-9.75%
STM
STMicroelectronics
25.65
-5.31
-17.15%
UMC
United Micro
6.88
-1.61
-18.96%
GFS
GlobalFoundries Inc
33.07
-13.22
-28.56%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.