Thursday, August 9, 2018

ams AG Suffering Through Growing Pains

Although ams AG (OTCPK:AMSSY) (AMS.S) shares have done better than peers/rivals like Lumentum (LITE) and Himax (HIMX) over the past year, the performance over the past three months has been quite weak as investors have worried about a variety of risks including slower adoption of 3D sensing by smartphone OEMs, lower near-term margins, the possibility of main customer Apple (AAPL) turning to a second supplier in 3D sensing, and management’s apparent willingness to consider additional M&A.

To some extent I’m not surprised that the shares have been this volatile (“volatility” has been one of the main risks I’ve noted in past write-ups), and revenue guidance has been healthy even if margin worries remain. This is not going to be a stock for the low-risk crowd, but I continue to believe mid-teens long-term revenue growth from growing 3D sensing adoption in smartphones and in non-consumer markets can support a fair value for the ADRs of around $50.

I would note that the U.S. ADRs are not especially liquid, and investors may wish to consider the Swiss listing.

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ams AG Suffering Through Growing Pains

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