What a disaster! A brutal winter beckons ahead for AEM share price following the release of the recent disastrous Intel’s 4th quarter financial result. The day after the release of Intel’s financial result, AEM share price tumbled 3%. It remains to be seen if this is the start of another slippery slope for AEM share price in the coming weeks as the full-year financial result for AEM will be released in February.
In October 2022, AEM share price had suffered a devastating meltdown of 25% within two weeks following reports that Intel is going to lay off workers amid steep decline for its core businesses – PC and Data Center. In this blog, I have always maintained that on its day, AEM share price can be unbeatable. Conversely, when the tide goes against AEM share price, the counter can spiral out of control. In view of this, this counter is really not for the faint-hearted.
The full-year financial result for AEM should be stellar based on the 9MFY2022 financial performance. This should provide a much-needed booster shot for AEM share price. However, investors must be wary of a bull trap as the market is bracing for a looming downturn. Intel had guided that revenue for 1QFY2023 would decline by a whopping 40% year-on-year while loss per share would be US$0.15.
Intel CEO revealed that its customers had too many chips and needed to work through their inventories. Looking at data extracted from Semiconductor Industry Association, global semiconductor industry sales were US$45.5 billion during the month of November 2022, a decrease of 2.9% compared to the October 2022 total of US$46.9 billion. Based on the historical trend, the current semiconductor slump should be similar to that of 2000-2001 dotcom, which lasted for four quarters. We are currently into third quarter from the peak.
Source: WSTS (Worldwide Semiconductor Revenues)
Previously, I wrote in this blog that I was 200% convinced that AEM share price would rise from the ashes to hit another new high. Given the slump in the semiconductor industry, my conviction still remains but the recovery for AEM share price is unlikely to arrive in 2023.
The problem with AEM is that the Group is still too reliant on Intel for revenue. To be fair to the management, the Group did manage to reduce its revenue from Intel to around 60% (based on DBS’s report on 28 October 2022). Previously, Intel used to account for as high as 90% of AEM’s total revenue due to the sale of the massively successful High Density Modular Test (HDMT) equipment. Despite the effort to diversify revenue sources, the dependence on Intel is still too high. This results in customer concentration risk – troubles at Intel would impact AEM directly.
All eyes will be on the coming full-year financial result for AEM as investors will be looking at the sales guidance for FY2023. Last year had been an extremely challenging year for the semiconductor industry but AEM has bucked the trend to achieve record-breaking revenue and profits. Nevertheless, it remains to be seen if the Group can continue to perform well in this year.Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am vested in this counter, so my views on AEM share price (SGX: AWX) may be biased.
AEM share price faces massive volatility in 2023
To be honest, it is hard to imagine Non-Executive Chairman Loke Wai San pulling another rabbit out of his hat. In August 2021, the management released a set of poor 1HFY2021 result at late night (10:48PM). Usually when a listed company announces its financial result at late night, it can only mean one thing – disappointing financial result. That night, many investors could not sleep well. Yet, the next day, AEM shocked the market by announcing the entry of Temasek.
This time round, I think AEM share price will likely to jump with the release of FY2022 full-year financial result but the rally may not sustain unless there is [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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