GlobalFoundries Pops Nearly 9% On Better-Than-Expected Q3 Results

Key Points

• Shares of chip manufacturer GlobalFoundries jumped in heavy trading volume Tuesday following the company's third-quarter report, which topped analysts' views. 
• The company issued guidance for the current quarter that came in ahead of consensus estimates.
• The stock is among top performers within the chip manufacturing industry. 

The semiconductor manufacturing industry has been powering down throughout 2022, but newly-public GlobalFoundries NASDAQ: GFS is bucking that trend with a gain of 10.90% in the past month and 5.99% in the past three months.

On Tuesday, shares popped 8.62%, or $4.85, closing at $61.12. Trading volume was 185% heavier than average. The move followed the company’s better-than-expected third-quarter earnings report.

Net income in the quarter was $0.67 per share on revenue of $2.074 billion. That represented growth of 1,016% and 22%, respectively. The company exceeded analyst views on both the top and bottom lines. 

As you can see using MarketBeat earnings data,  GlobalFoundries beat both sales and earnings views in the previous three quarters. The most recent results also came in ahead of the company’s own guidance.

The Malta, New York-based company makes integrated circuits used in microprocessors, mobile app processors, radio frequency modems, power management units, and other systems. It also offers wafer fabrication services. As the company’s name implies, it operates globally, with facilities not only in the U.S., but in Europe and Asia. 

Highlights of Tuesday’s report included:

• Record revenue of $2.1 billion.
• Record gross margin of 29.4% and adjusted gross margin of 29.9%.
• Record operating margin of 17.2% and adjusted operating margin of 18.8%.
• Record net income of $336 million and adjusted net income of $368 million.
• Record adjusted EBITDA of $793 million.
• Cash, cash equivalents and marketable securities of $3.5 billion.

The company cited other positive developments, including the development of a proprietary chip for a large automotive supplier. This product will be shipped from both the Dresden and Singapore facilities, establishing a high-volume, secure supply chain for the automotive industry.

Stateside, GlobalFoundries received $30 million in federal funding to advance the development and production of next-generation gallium-nitride-on-silicon semiconductors at its facility in Essex Junction, Vermont. These chips will have applications for the electric vehicle industry, among others. 

Also on Tuesday, the company issued guidance for the current quarter, saying it expects revenue in a range between $2.05 billion and $2.1 billion. That range encompasses analysts’ consensus view of $2.08 billion, so essentially in line with current expectations. However, management said it now expects earnings in a range between $1.24 and $1.44 per share, ahead of consensus views calling for $1 per share. 

In September, the company said it would be added to the Philadelphia Stock Exchange Semiconductor Index. That’s significant, as it means ETFs tracking the index will eventually hold positions in the stock, and that also means the stock will grab more attention from analysts and institutional investors. 

GlobalFoundries has a market cap of $33.18 billion. That sounds pretty big, and in some industries, that would put a stock among the top three, in terms of size. However, in the chip manufacturing industry, GlobalFoundries is smaller than its industry peers, including Taiwan Semiconductor NYSE: TSM, Texas Instruments NASDAQ: TXN, Intel NASDAQ: INTC, Analog Devices NASDAQ: ADI, NXP Semiconductors NASDAQ: NXPI and Microchip Technology NASDAQ: MCHP. 

When it comes to price performance within its industry, GlobalFoundries is currently lagging behind only mid-cap MACOM Technology Solutions NASDAQ: MTSI and fellow large-cap onsemi NASDAQ: ON.

Although it went public in October of last year, GlobalFoundries is hardly a new business. It was spun off from Advanced Micro Devices (AMD) and privately held until last year’s IPO. 

Globalfoundries’ chart shows a cup pattern that began forming in August, with a current buy point above $65.96. Despite its large market cap, the stock is still more volatile than the broader market, with a beta of 1.71. A glance at the chart shows wide intraweek price swings. 

While there’s plenty of uncertainty ahead when it comes to global economic conditions, specifically recession and inflation, this company’s third-quarter report and promising guidance mean it could be a watchlist candidate.