ams OSRAM Still Can't Catch A Bid Despite Very Low Built-In Expectations

 

Despite a very low valuation, ams OSRAM (OTCPK:AMSSY) (“ams”) still can’t buy a break. The expected loss of 3D sensing business at Apple (NASDAQ:AAPL) has been confirmed, but that hasn’t really brought any relief, as the ADRs of this sensing and lighting semiconductor chop around $10 and have lagged the SOX index since my last update.

While I do think the current valuation undervalues the potential of the business, whether management is up to the task of realizing that potential is very much up for debate. Front-facing 3D sensing adoption has been slow with Android OEMs and it looks as though both the behind-OLED (or BOLED) and LIDAR-on-VCSEL programs are behind schedule. This isn’t the first time that ams has had operational stumbles, and it raises questions about how smoothly the integration of OSRAM will go and how effectively the company can leverage design and product synergies.

All of that pessimism and more seems to be in the shares now. While I could argue for a fair value as low $8 on the basis of weak near-term margins, I think fair value is more in the low-to-mid teens assuming just 3% long-term revenue and lackluster long-term margins.

 

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ams OSRAM Still Can't Catch A Bid Despite Very Low Built-In Expectations