Tower Semiconductor nears NIS 10b market cap

Russell Ellwanger Photo: Eyal Yizhar

Tower, which now specializes in analog chips, has seen its share price double over the past year.

The share price of Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE: TSEM) (which trades as Tower-Jazz), one of the Tel Aviv Stock Exchange (TASE) stars for the past year, soared by over 10% in the past week, and has now almost doubled in the past year, reaching its highest level in a decade and boosting the Migdal HaEmek-based company's market cap to NIS 9.5 billion ($2.6 billion).

Tower Semiconductor, which specializes in analog chips, is scheduled to publish its results for the second quarter of 2017 on August 3. The company, led by CEO Russell Ellwanger, posted $330 million in revenue in the first quarter 18.7% more than in the corresponding quarter in 2016.

Tower Semiconductor made a $45.5 million net profit in the first quarter, $50 million profit excluding one-time items, almost 60% more than in the corresponding quarter last year. Furthermore, the company generated $82 million in positive cash flow from current activities, and $42 million free cash flow, excluding investments in equipment and assets. In recent quarters, Tower Semiconductor has outperformed the forecasts of both its management and the analysts, and investors may be sensing another positive surprise this time.

When Tower Semiconductor published its first quarter results, its management said that its revenue would be around $345 million in the second quarter, 13% more than in the second quarter of 2016, while the average estimate by the analysts covering the company was a $47 million profit ($0.50 per share). For 2017 as a whole, the analysts predicted $1.4 billion revenue and a profit of $2.03 per share.

US investment house Needham published a review of Tower Semiconductor a month ago, following a meeting between the company's management and investors and analysts. The analysts cited a target price of $35 for the share, 30% higher than the current market price on Nasdaq. Needham believes that Tower Semiconductor will reach $1.5 billion in revenue and a profit of $2.20 per share in 2018, meaning that the share is currently being traded at a forward multiple of 13.

In recent years, Tower Semiconductor, which operates in an industry regarded as particularly cyclical and difficult, has repeatedly surprised investors in Israel and the US with impressive results. The company finished 2016 with sales growing 30% to $1.25 billion and a $204 million net profit on the year, compared with a $30 million loss in 2015.

Five months ago, upon the publication of the company's 2016 results, Ellwanger told "Globes," "There are always opportunities, and now we have enough cash and ability to take advantage of many opportunities and put many ideas into practice, in contrast to the past, when we had no cash at all, and were very restricted by the banks in what we could do. The company is in a very good situation, there are many opportunities to exploit, and we're considering them.

"The world of analog chips continues to grow at a rapid pace. There are entire industries, such as autonomous cars for example, that depend on analog chips. Even in the digital world, there will also be a great deal of demand for analog chips, and I don't see its growth ending or slowing in the coming years. The industries to which the company is selling are growing rapidly, and new areas of interest are emerging almost constantly, so I'm very optimistic about the future."

Published by Globes [online], Israel Business News - www.globes-online.com - on July 20, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Russell Ellwanger Photo: Eyal Yizhar
Russell Ellwanger Photo: Eyal Yizhar
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