GlobalFoundries is the IBD Stock of the Day, with GFS stock trading close to a buy point for the contract chipmaker. Shares of GlobalFoundries have carved out a double-bottom base with a buy point of 61.98.
In a down day for markets, though, GFS stock fell 4.6% to close at 61.20 on the stock market today.
The Malta, N.Y.-based company recently reported second-quarter results that beat Wall Street's targets and guided higher for the current period, though earnings are expected to be down in 2023 compared with this year.
Reporting on Aug. 9, GlobalFoundries said it earned an adjusted 58 cents a share on sales of $1.99 billion. Analysts polled by FactSet expected earnings of 45 cents a share on sales of $1.97 billion. In the year-earlier period, GlobalFoundries lost 6 cents a share on sales of $1.62 billion.
For the current quarter, the company expects adjusted earnings of 62 cents a share on sales of $2.05 billion. That's based on the midpoint of its guidance. Analysts had predicted earnings of 44 cents a share on sales of $1.99 billion in the third quarter. In the year-earlier period, it earned 7 cents a share on sales of $1.7 billion.
On Track For Strong Year, CEO Says
"Our revenue grew 23% year-over-year, and we delivered record profitability, making significant progress toward our long-term financial model," Chief Executive Thomas Caulfield said in written remarks with the news release. "We remain on track to deliver a strong year of growth and profitability."
In the conference call with GFS stock analysts, Caulfield added, "We are seeing some areas of the market beginning to rebalance supply and demand, including end markets such as low-end handsets, PCs and in general, the lower end of consumer electronics market."
He also said total demand for GlobalFoundries solutions remains robust and capacity continues to be oversubscribed.
"Specifically, we continue to see healthy demand in fast growing end markets, such as home and industrial IoT, automotive, communications infrastructure and data center," Caulfield said.
How GFS Stock Benefits From CHIPS Act
GlobalFoundries and a bundle of other semiconductor stocks received positive news recently when President Joe Biden signed a law that aided the U.S. chip industry. But the legislation, which will help fund domestic semiconductor production and research, will take years to bear fruit.
Officially called the "Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022," or CHIPS, the bill provides $52.7 billion in subsidies over the next five years to boost U.S. chip production.
It also includes a 25% investment tax credit for chip plants worth an estimated $24 billion over the next decades.
Deutsche Bank analyst Ross Seymore said chipmakers with the largest existing fabrication plants, or fabs, in the U.S. will benefit most from the CHIPS Act. That includes GlobalFoundries, along with Intel and Texas Instruments.
Among other positive events, last week, GFS stock soared 11.5% to 59.19 after it disclosed an expanded supply agreement with Qualcomm.
Where GFS Stock Ranks
GlobalFoundries held its initial public offering in October, pricing GFS stock at 47 a share. It's up 30% since then.
GlobalFoundries stock holds the No. 8 rank among its peers in the Electronics-Semiconductor Manufacturing industry group. Analog Devices and ON Semiconductor are among the top 5 highly rated stocks within the group.
According to IBD Stock Checkup, GFS stock has an IBD Composite Rating of 89 out of 99. IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
Also, when looking for the best stocks to buy and watch, focus on those with rising relative price strength. GFS stock fits that bill. The company's Relative Strength Rating stood at 92 on Friday.
IBD's unique RS Rating tracks technical performance by showing how price action for issues such as over the last 52 weeks measures up against that of the other stocks in IBD's database.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
