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Summary

  • First quarter results were very encouraging after analyzing the effects of TPSC.
  • One measure that caught our eye was the fact that operating margins increased from 13 percent to 21 percent in the first quarter of 2014 when compared to 2013.
  • TPSC is expected to raise quarterly revenue $90 to $105 million respectively.
  • Tower Semiconductor Ltd. also has $183 million in total cash and just over $6.00 per share in revenues.

Tower Semiconductor Ltd. (NASDAQ: TSEM) opened the door for future quarterly revenue growth of 18 percent when the company signed a deal with Panasonic (OTCPK:PCRFY). The deal created TowerJazz Panasonic Semiconductor Company and Tower Semiconductor Ltd. is back in the black once again.

TPSC will be the next catalyst that catches this company on fire once again. TPSC is expected to raise quarterly revenue $90 to $105 million respectively. This move in revenue growth might be enough to push Tower Semiconductor Ltd. to over $1 billion in annual revenue. TowerJazz holds approximately 51 percent of the joint venture with Panasonic, while Panasonic has agreed in terms to purchase these products manufactured by TPSC for the next five years.

First quarter results were very encouraging after analyzing the effects of TPSC. Tower Semiconductor Ltd. realized a profit of $39 million. This was quite a jump from losing $23 million in the same quarter in 2013. Other synergies can be gained in this partnership by leveraging existing customers and reducing overall research and development costs. Anytime a company can increase its exposure to new markets by aligning themselves with an industry leader is good for business and the shareholders.

After signing the agreement which transfers three existing manufacturing plants in Japan to TowerJazz, the company announced the closure of one facility in Japan that will lower fixed costs some $130 million per year. There might be room for good will here too, as the company has hired a respected hiring firm to help the recently unemployed workers. Loyalty to workers in Japan is highly regarded by society and this will only help in future employment searches for highly qualified workers and innovators.

Outlook

Tower Semiconductor Ltd. had a great first quarter for the 2014 year. But this was led by a one-time net acquisition of $150 million from the value of the TPSC venture. One measure that caught our eye was the fact that operating margins increased from 13 percent to 21 percent in the first quarter of 2014 when compared to 2013. Shareholder equity also jumped in the first quarter of 2014 to $200 million up some $60 million from the final quarter of 2013.

These are positive signs that the company has transitioned nicely into its role with Panasonic. Tower Semiconductor Ltd. carries a forward price to earnings of 3.85 at its current share price of $9.50. Tower Semiconductor Ltd. also has $183 million in total cash and just over $6.00 per share in revenues. With continuing success in their TPSC venture analysts have set a price target of $15.00. This could represent a nice windfall if the company realizes continued positive results moving through 2014. But ultimately we must play the wait and see game until investors can get a fuller picture of the potential the new TPSC joint venture will have on revenue growth and overall operating costs.

Source: Tower Semiconductor - Ready For The Next Level