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Tower Semiconductor (TSEM)
NASDAQ:TSEM
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Tower
(NASDAQ:TSEM)
Rating:76Outperform
Price Target:
$55.00
▲(16.77%Upside)
Positive Factors
Business Expansion
Tower Semiconductor is well positioned to capitalize on the early days of the next industry upcycle, with its increasing leverage to AI Data Center growth and material new smartphone business with Apple.
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.
Negative Factors
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
$5.26B
Dividend YieldN/A
Average Volume (3M)763.84K
Price to Earnings (P/E)26.1
Beta (1Y)1.63
Revenue Growth5.22%
EPS Growth-58.99%
CountryUS
Employees5,613
SectorTechnology
Sector Strength86
IndustrySemiconductors
Share Statistics
EPS (TTM)0.45
Shares Outstanding111,756,620
10 Day Avg. Volume777,237
30 Day Avg. Volume763,838
Financial Highlights & Ratios
PEG Ratio-11.47
Price to Book (P/B)1.85
Price to Sales (P/S)0.00
P/FCF Ratio-295.83
Enterprise Value/Market Cap0.93
Enterprise Value/Revenue0.86
Enterprise Value/Gross Profit14.45
Enterprise Value/Ebitda2.72
Forecast
1Y Price Target
$60.00Price Target Upside27.39% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering3
Tower Business Overview & Revenue Model
Company DescriptionTower Semiconductor Ltd. (TSEM) is a leading Israeli company in the semiconductor industry, specializing in the manufacture and development of integrated circuits. The company provides a robust platform for analog intensive mixed-signal semiconductor solutions, offering a variety of process technologies such as CMOS image sensors, power management and mixed-signal RF and MEMS. Tower Semiconductor operates several fabrication facilities worldwide, serving a diverse range of markets including consumer electronics, automotive, industrial, medical, and aerospace.
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: 17.49%|
Next Earnings Date:Aug 04, 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 shows strong financial performance with robust revenue growth and profitability. The balance sheet is solid, with low leverage and high equity. However, the negative free cash flow is a concern that requires strategic adjustments.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 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
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 |
| EBITDA | 451.32M | 851.12M | 594.75M | 437.22M | 331.56M |
| Net Income | 207.86M | 518.49M | 264.57M | 150.01M | 82.30M |
Balance Sheet | |||||
| Total Assets | 3.08B | 2.92B | 2.55B | 2.23B | 2.09B |
| Cash, Cash Equivalents and Short-Term Investments | 1.22B | 1.24B | 1.01B | 764.65M | 710.88M |
| Total Debt | 180.81M | 231.56M | 272.34M | 314.84M | 390.28M |
| 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
Positive
47.10
Price Trends
42.92
Positive
39.78
Positive
43.72
Positive
Market Momentum
1.69
Positive
57.59
Neutral
47.86
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 47.1 is above the 20-day moving average (MA) of 45.93, above the 50-day MA of 42.92, and above the 200-day MA of 43.72, indicating a bullish trend. The MACD of 1.69 indicates Positive momentum. The RSI at 57.59 is Neutral, neither overbought nor oversold. The STOCH value of 47.86 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 (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $18.56B | 13.57 | 11.65% | 0.64% | 2.22% | -22.39% | |
76 Outperform | $56.77B | 26.55 | 23.11% | 1.81% | -7.53% | -21.88% | |
76 Outperform | $5.26B | 26.08 | 7.88% | ― | 5.22% | -58.99% | |
74 Outperform | $22.98B | 21.61 | 11.47% | 0.24% | 1.32% | 4.86% | |
71 Outperform | $23.68B | 27.13 | 3.72% | 0.96% | -22.97% | -78.58% | |
63 Neutral | $34.70B | 4.89 | -11.39% | 1.66% | 5.53% | -19.00% | |
61 Neutral | $21.69B | 28.15 | -1.69% | ― | -4.42% | -120.96% |
* Technology Sector Average
Performance Comparison
TSEM
Tower
47.02
4.14
9.65%
ASX
ASE Technology Holding Co
10.50
0.43
4.27%
NXPI
NXP Semiconductors
223.29
-25.68
-10.31%
STM
STMicroelectronics
26.32
-7.28
-21.67%
UMC
United Micro
7.32
-0.03
-0.41%
GFS
GlobalFoundries Inc
39.98
-11.77
-22.74%
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.