What happened

Shares of Rambus (NASDAQ:RMBS) rose 57% in the first six months of 2019, according to data from S&P Global Market Intelligence. The technology researcher was coming off a rough 2018, in which the stock plunged 46% lower amid a weaker semiconductor industry at large. That sector's modest recovery in 2019 seems to spell good tidings for Rambus in the long run.

Two hands making thumbs-up and thumbs-down gestures in front of several uncut sheets of semiconductor silicon.

Image source: Getty Images.

So what

Chipmakers of every stripe ran into difficulties in 2018 as smartphones lost some of their consumer appeal and the Trump administration started a tariff-laden trade war with China. Some of the company's royalty-paying customers had to limit their production volumes while figuring out how to move their manufacturing efforts to countries not affected by Trump's tariffs. Those relocation efforts started to pay dividends this year, and Rambus has been signing new licensing contracts in other countries. Moreover, Rambus is revamping its product portfolio to focus on research in higher-growth target markets.

"We have refocused our product portfolio research and patent development on our core strength in semiconductor, delivering high speed interface and secure silicon IP as well as memory buffer chips to leading chip and system manufacturers worldwide," said CEO Luc Seraphin in April's fourth-quarter earnings call.

The revenue slump of 2018 has started to reverse, ever so gently:

RMBS Revenue (TTM) Chart

RMBS Revenue (TTM) data by YCharts.

Now what

Before you get all excited about Rambus' rebound, you should consider the fact that the company remains deeply unprofitable. Rambus has reported negative unadjusted earnings in each of the last six quarters, not to mention negative operating income for five straight reporting periods. The picture changes a bit if you switch to free cash flows instead, where Rambus produced $89 million of cash over the last four quarters, but even that metric occasionally swings into red-ink territory from time to time.

That being said, Rambus manages to look slightly undervalued even after this 56% surge in the last six months. The stock is trading for just 12.5 times forward earnings and 14.8 times free cash flows, showing that Wall Street analysts expect the bottom line to turn positive very soon.