Needham analyst Rajvindra Gill offered his bullish take on two semiconductor stocks.
2022 has plagued Magnachip with several issues, he acknowledged.
Firstly, supply chain shortages have impacted the company for several quarters.
Secondly, inventory building at distributor and retail levels is causing temporary order cuts at the large Korean customer.
Thirdly, the new Chinese customer modified their design, pushing production back towards the end of 4Q22.
These headwinds will likely reverse in 2023, and he is confident the OLED business could more than double off CY22E's low base.
He saw four drivers for the steep ramp. They included a 2-4x wafer supply increase from the new second source, increasing supply from the primary existing source, ramping designs with Samsung Display, and full OLED DDIC production with the Chinese panel maker.
He noted that Velodyne reported a slight beat on the top line but guided a more significant miss with revenue declining sequentially.
The company continues to be impacted by supply constraints while planned cost reductions take time, he added.
Further, the management sees demand remaining strong, citing increasing backlog and billings up Q/Q.
With ~$230 million in cash on the balance sheet, he estimates that the company has enough runway to complete its cost transitions and capitalize on the growing catalog of design wins.
Price Action: MX shares traded lower by 14.79% at $12.10 on the last check Tuesday.
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