What happened
Shares of upstart chip designer indie Semiconductor (INDI 6.33%) were up 32.2% today at 11:55 a.m. ET. It's a welcome reprieve from a brutal sell-off that has the stock down over 40% so far in 2022, even after the big rally. First-quarter 2022 earnings results are today's catalyst.
Image source: Getty Images.
So what
Back in March, indie's management said it was on track to achieve the high end of its financial guidance (160% to 170% sales growth) provided during the end-of-2021 earnings report. The small company didn't disappoint. Q1 sales of $22 million were up 16% from the prior quarter and up 171% from a year ago.
Investors were also cheering the guidance for Q2. The company expects year-over-year growth of 172% to 183%, putting the tiny but hypergrowth chip outfit on track to achieve $100 million in sales for 2022 at the midpoint of guidance. For comparison, revenue was just $48 million in 2021.
Now what
With the kind of white-hot growth indie Semiconductor is posting right now, it's easy to get excited about a slice of this business -- until, of course, you look at the stock performance since indie went public last year via SPAC merger. Auto technology like autonomous driving systems, vehicle connectivity, and electrification are a megatrend for the chip industry, and especially for indie, given its focus is squarely on this niche.
But is this nothing more than a highly speculative bet? After all, indie is still losing money. Adjusted operating loss, after excluding $5.5 million in acquisition expense and $12.4 million in stock-based compensation to employees, was negative $16.5 million in Q1. However, management said in its guidance for full-year 2022 that it expects to achieve breakeven by the second half of this year. Over the longer term, it's eyeing operating profit margins of 30%, which would be in line with big well-established chip design peers.
If you believe indie can achieve its long-term goals, now might be a decent time to start nibbling. Based on the midpoint projection of $100 million in revenue, indie Semiconductor stock trades for 8.8 times enterprise value to forward sales. This will remain a highly volatile investment, but indie is clearly onto something as it carves out a little space for itself in the semiconductor industry.
