SkyWater Shares Soar, Analyst Find It Capable Of Decoupling From Broader Semi Slowdown

Needham analyst Rajvindra Gill maintained a Buy rating on SkyWater Technology Inc (NASDAQ: SKYT) and set a price target of $20.00.

SKYT reported a solid quarter and guidance, with margins being the bright spot, Gill wrote in a Tuesday note titled "Can SkyWater Decouple From the Broader Semi Slowdown? We Believe So."

He highlighted ATS is the primary driver for the beat, growing 18% Q/Q and 57% Y/Y.

He further noted that Phase 2 of the Rad-Hard award worth $100 million (RH90).

He also emphasized the $36 million grant award to expand capacity in Florida for advanced packaging.

Wafer Service revenue grew 36% Y/Y due to better pricing and higher fab efficiency, he noted.

The gross margins inflect, growing to 16.8% above the 8% estimate due to volume, cost reduction, and fixed cost absorption, he added.

Gill believes SKYT is uniquely buffered to a broader semi-slowdown as ~2/3 of its revenue is tied to company R&D projects.

During a downcycle, companies invest in capacity for the inevitable upswing in the cycle.

Moreover, he was more confident that margins were breaking out and could expand in CY23.

Price Action: SKYT shares traded higher by 31.70% at $11.38 on the last check Tuesday.

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