GlobalFoundries just beat Q4 estimates, propelling the contract GFS stock into a new buy zone. The breakout comes on the heels of the chipmaker forging a long-term agreement with General Motors and an acquisition to expand its IoT footprint.
The GM news and yet another explosive earnings report earn GlobalFoundries a featured spot on the IBD Breakout Stocks Index.
Highlighting the resurgence in tech stocks after last year's bear market, ON Semiconductor, Broadcom, Cirrus Logic, Super Micro Computer and Axcelis Technologies join GFS stock on the index.
While GlobalFoundries did not join fellow semiconductor sector stocks Lattice Semiconductor, Mobileye and AVGO on the latest list of new buys by the best mutual funds, leading money managers have shown a keen and rising interest in the chipmaker.
GlobalFoundries earns an A+ Accumulation/Distribution Rating, pointing to heavy buying by institutional investors over the last 13 weeks. The number of funds with a position in the company has increased for four straight quarters, jumping from 323 funds in Q1 to 452 in Q4.
Plus, 41 funds with an A+ rating from IBD own GFS stock.
Who Joins GFS Stock On The IBD Breakout Stocks Index?
GlobalFoundries, GM Forge 'First-Of-Kind' Partnership
As one of the world's leading semiconductor manufacturers. GlobalFoundries delivers Internet of Things (IoT) and other feature-rich processes for high-growth markets. The semiconductor powerhouse offers a mix of design, development and fabrication services to clients spanning the U.S., Europe and Asia.
Formerly the foundry division of Advanced Micro Devices, GlobalFoundries was spun off in 2009 and had its IPO in October 2021.
On Feb. 9, GlobalFoundries and GM jointly announced a "first-of-its-kind" agreement. Under the deal, General Motors enters a long-term agreement to secure a capacity corridor in GlobalFoundries' New York facilities for GM's U.S. supply chain.
The arrangement brings a critical process to U.S. shores. GlobalFoundries will manufacture GM's key chip supplies at the chipmaker's advanced semiconductor facility in upstate New York.
IoT Business Expanding
On Feb. 9, GlobalFoundries announced the acquisition of Renesas Electronics' Conductive Bridging Random Access Memory (CBRAM) technology. This low power memory solution enables a range of applications in home and industrial IoT and smart mobile devices.
The move enhances GlobalFoundries' push to differentiate its technology portfolio to cement a foundation of energy-efficient IoT applications for decades to come.
In 2022, the Smart Mobile Devices segment made up roughly 46% of GlobalFoundries' business. Its Home & Industrial IoT business grew to 18%, up from 13% in 2021.
GlobalFoundries Drives Explosive Growth — Again
After going public, GlobalFoundries delivered four quarters of massive triple-digit or even bigger earnings growth. However, those numbers were based on prior-year quarters that showed a loss.
The chipmaker continued to impress in Q3 and again in Q4, with the company posting 700% earnings growth, or $1.44 per share, in the final quarter of last year. Analysts forecast a 26% EPS slowdown this year, but a rebound to a 39% increase in 2024.
On the revenue side, sales growth has slowed over the last five quarters, decelerating from 74% to 14% in Q4. GlobalFoundries has a middling C SMR Rating, which tracks sales growth, profit margins and return on equity.
Overall, GFS stock holds a 92 Composite Rating, showing it's outpacing 92% of all stocks in terms of key stock-picking traits.
GFS Stock Fabricates Big Breakout
After reporting another quarter of explosive growth, GlobalFoundries bolted higher in massive volume Tuesday. GFS stock blew right past a 69.40 buy point in an early stage cup. It closed Tuesday's session within the buy zone, 4% above the entry.
GlobalFoundries pulled back at Wednesday's open, but showed resilience to bounce back into the buy zone. It ended the session 1% above the buy point. The stock was down for the day, but closed near the top of its price range.
Showing market leadership, the relative strength line has surged to just below a 52-week high.
As semiconductor stocks like LSCC and ON Semi continue to soar and AVGO and AMD show strength, see if GFS stock can continue to rise and punch past its all-time high of 79.49.
IBD Breakout Opportunities ETF
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Follow Matthew Galgani on Twitter at @IBD_MGalgani.
