GlobalFoundries rises as Baird says gross margins could rise thanks to CHIPS Act
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GlobalFoundries (NASDAQ:GFS) shares rose on Thursday as investment firm Baird reiterated its outperform rating on the semiconductor company, noting that there is an increasing feeling that it will exceed its long-term gross margins targets.
Analyst Tristan Gerra, who has an outperform rating and a $100 price target on GlobalFoundries (GFS) shares, noted that the company has raised the average sell price of its long-term agreements and increased its mix. All of this allows the company to offer "differentiated, best-in-class technology while benefiting from customers' desire for geography diversification."
Gerra also noted that the CHIPS Act, which President Biden signed into law on Tuesday, should be "incremental" to the company's long-term gross margin target. In the second-quarter, GlobalFoundries (GFS) had a non-GAAP gross margin of 28%, up 2.7% sequentially.
GlobalFoundries (GFS) shares gained nearly 1% to $58.24 in mid-day trading.
The analyst also noted that demand is continuing to outpace supply by roughly 10% and GlobalFoundries (GFS) is "oversubscribed" throughout next year, which should alleviate investor concerns about excess inventories.
Some of GlobalFoundries' (GFS) customers include Qualcomm (QCOM), NXP Semiconductors (NXPI) and Qorvo (QRVO), among others.
On Tuesday, GlobalFoundries (GFS) CEO Tom Caulfield said the semiconductor maker's balanced supply chain and its diversified markets allowed it to beat Wall Street expectations for the second-quarter.