-- Amkor Technology (AMKR) started 2026 strongly with a Q1 earnings beat and a guidance raise, but will need to prove sustained execution due to elevated valuation, Morgan Stanley said in a Tuesday note.
The company's Q1 results were driven by its Communications segment, and smartphones in particular, Morgan Stanley analysts said. Improving demand in mainstream segments and a higher gross margin percentage also played a part, with Amkor making progress to hit its mid- to high-teens gross margin percentage growth target by H2, the analysts said.
The analysts credited Amkor's current wins, including production ramps, its facility in Arizona progressing as planned, and gross margin expansion. However, they are staying cautious due to risks such as increasing supply constraints and export control uncertainty.
With Amkor's stock up more than 70% year-to-date and trading at 31x of Morgan Stanley's revised 2027 EPS, the analysts said they view the company as a "show-me" story.
Morgan Stanley maintained the company's stock rating at equal-weight and raised the price target to $69 from $45.
Price: $69.17, Change: $-6.45, Percent Change: -8.53%