Tower Semiconductor Ltd. (NASDAQ:TSEM), which is in the semiconductor business, and is based in Israel, saw significant share price movement during recent months on the NASDAQGS, rising to highs of $18.77 and falling to the lows of $15.69. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Tower Semiconductor's current trading price of $16.65 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Tower Semiconductor’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
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Is Tower Semiconductor still cheap?
Great news for investors – Tower Semiconductor is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $21.59, but it is currently trading at US$16.65 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Tower Semiconductor’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Tower Semiconductor look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Tower Semiconductor, it is expected to deliver a negative earnings growth of -16%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although TSEM is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to TSEM, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on TSEM for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Tower Semiconductor. You can find everything you need to know about Tower Semiconductor in the latest infographic research report. If you are no longer interested in Tower Semiconductor, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.