Why Amkor Technology Inc. Shares Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Amkor Technology  (NASDAQ: AMKR  )  gained over 10% today after the semiconductor product packaging and test services company yesterday evening reported revenue and earnings that topped Wall Street's expectations.

So what: Amkor's first-quarter revenue grew a mere 1.2% year over year to reach $696 million, but this was well ahead of the modest $678.5 million Wall Street had expected. Earnings of $0.09 per share also trounced Wall Street's expectation of $0.02. Looking ahead, Amkor executives expect the company to generate between $735 million and $785 million in revenue for the second quarter, which handily bests the analyst consensus of $732.9 million on the top line. The company also projected between $0.08 and $0.12 in EPS, which hits the $0.12 analyst consensus on the high end but falls short on average. Investors on Tuesday looked past Amkor's mediocre EPS guidance in favor of strong revenue.

Now what: Amkor has had a tough time pushing revenue or EPS higher over the past few years -- its top line is effectively flat since the end of 2010, and EPS has fallen quite a bit over that same period. The company's free cash flow has also fallen into negative territory since 2010, but there are signs that this weakness is reversing. At a 15.4 P/E, Amkor isn't quite expensive, but this valuation is about average for its post-2010 period as well. I'd tread cautiously here, but this could be a chance to buy into further gains if Amkor can keep its EPS on a growth trajectory.

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