Shares of Tower Semiconductor (TSEM 0.69%) rallied 11% on Monday.
Tower Semi is a semiconductor manufacturer of lagging-edge specialty chips across radio frequency mobile and infrastructure, power chips, sensors and display chips, and other kinds of discrete chips.
Tower didn't report any financial news today, as its earnings were last month. However, the company is headquartered in Israel, with a dual listing on both the Nasdaq stock exchange as well as the Tel Aviv stock exchange in Israel.
The Tel Aviv Stock Exchange was up nearly 6% today following this past weekend's events regarding Iran, propelling Tower Semiconductor's stock along with it.
NASDAQ: TSEM
Key Data Points
War increases uncertainty, but investors become more optimistic about Israel
Over the weekend, U.S. and Israeli forces killed Iran's Ayatollah Ali Khamenei as well as a large portion of Iran's senior leadership. The destruction of Israel has been a main goal of the Iranian regime since it took over the country in the 1979 revolution. Therefore, while the strikes on Iran's leadership increase uncertainty, it appears investors are taking the past weekend's events as a catalyst for potentially a more secure future for Israel, with the downside risk being no worse than it was before.
Tower stock's rise appears to be driven purely by these technical mechanics, as most of Tower's semiconductor fabs aren't located in Israel. Tower owns one fab in Israel, one in Italy, and two in both the U.S. and Japan. That being said, the company's headquarters is located in Israel, in the town of Migdal Haemek, in the Northern part of the country.
Image source: Getty Images.
Tower has had a fantastic year
Tower's stock is up a whopping 255% over the past year, as it is a dominant provider of 1.6-terabit silicon photonics transceivers that are now in high demand from artificial intelligence data centers.
While the stock appears expensive today at 71 times earnings, the company projects that if revenue and earnings grow into 85% of Tower's existing capacity as well as the extra capacity it will bring on this year, earnings would more than triple to $750 million. That would bring its valuation down to a more reasonable 21 times earnings, based that future earnings potential.
