Tower Semiconductor (TSEM 2.44%) was towering above many tech hardware stocks over the past few days. An encouraging quarterly earnings report, followed by several bullish analyst updates, sparked a lively rally in the chipmaker's equity. This drove the shares nearly 30% higher over the week, according to data compiled by S&P Global Market Intelligence.
A quarter to remember
In its first quarter, Tower booked revenue of $413.6 million, a 15% year-over-year improvement. Better, net profit under generally accepted accounting practices (GAAP) blasted 62% higher to $65 million. That metric on a non-GAAP (adjusted) basis also rose heartily, advancing by 48% to almost $74.5 million, or $0.65 per share.
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Both results exceeded the consensus analyst estimates of $408.4 million on the top line and $0.55 per share for adjusted net income.
Tower also beat on revenue guidance. Management's projection of $455 million for the company's current (second) quarter. This figure, which would set a new company record if achieved, topped the average analyst estimate of $436.4 million.
Separately, Tower announced that it had signed contracts to supply silicon photonics products with its largest clients that wil bring in a total of $1.3 billion in revenue next year.
NASDAQ: TSEM
Key Data Points
Two meaty price target raises
Tower's strong first-quarter performance and its clear potential for near-term growth prompted two analysts to raise their price targets significantly. In the wake of the earnings report, Craig-Hallum's Richard Shannon nearly doubled his to $325 per share from $175. His peer Cody Acree of Benchmark lifted his from $230 to $335, meanwhile. Both pundits maintained their buy recommendations.
Photon technology uses light rather than electricity to convey data quickly. This is particularly useful in the hardware that powers artificial intelligence (AI), an enduringly hot area of the tech industry. Tower clearly has great potential in this segment alone, so to me, the market's excited reaction (and those analyst price target boosts) are entirely justifiable.
