What happened
Shares of small auto technologist Indie Semiconductor (INDI -0.63%) fell 9.8% today as of market close. Shares of the semiconductor company, which went public via SPAC last summer, have been under pressure due to the threat of rising interest rates this year. Higher rates lower the future value of cash flows, which lowers the present value of a stock.
The stock is now 41% off its all-time high reached in November 2021.
Image source: Getty Images.
So what
Tiny businesses that can be purchased on the stock market are few and far between in the highly technical semiconductor industry, and Indie Semiconductor represents an especially exciting opportunity. The company is developing hardware for automakers, especially advanced driver assist systems (ADAS) and vehicle electrification. Indie just announced a new lidar chip in December, putting it in competition with a number of other lidar outfits competing for the coming wave of ADAS that will progressively unlock more advanced self-driving features in the coming years.
As a result of its chip designs, Indie has been scoring design wins with auto part manufacturers. Sales were $12.2 million in Q3 2021, up 60% year over year, and management said to expect a 50% sequential increase in sales for Q4 (which would work out to a 170% year-over-year increase). However, with an enterprise value of $921 million, Indie's torrid growth is already baked into its current valuation.
Now what
Indie is flush with cash ($324 million as of the end of September 2021) and has made a couple acquisitions as of late to build on its automotive technology momentum. However, it's also highly unprofitable right now as it spends heavily on research and development of its product suite. As a result, expect shares to remain highly volatile -- both due to higher interest rates and from big changes to expectations for the company's auto solutions.
Nevertheless, keep this small chip designer on your radar as it could carve out a sizable niche for itself in the industry. Autos are in need of lots of new circuitry, and Indie is working on some important components to enable self-driving and vehicle electrification.
