indie Semi: Autotech Winner
Summary
- indie Semi is a future autotech winner with a backlog set to soar beyond the last listed $2.6 billion level.
- The company has already forecast beating Q1'22 financial targets.
- The stock trades at just 4x '23 revenue targets and far below backlog totals.
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While the stock market is falling apart on recession and higher interest rate fears, some select stocks are holding onto previous levels. indie Semi (NASDAQ:INDI) remains a strong play in the Autotech sector riding a secular wave of higher demand. My investment thesis remains very Bullish on the budding business forecasting growth to top 100% rates in 2022.
Autotech Demand Surging
While the stock will get hit by a market sell off or even a crash, indie Semi should see relatively strong demand for their products this year. Even with current supply constraint issues holding back auto production, the company continues to hit and even exceed financial targets.
indie Semi reported Q4'21 revenues surged 185% to $19.0 million. The semiconductor company guided to Q1'22 revenues of $21.5 million, up 165%. At the end of March, indie Semi stated revenues for the quarter topped the high end of revenue guidance which amounts to exceeding $22.0 million.
As the CEO confirmed on the Q4'21 earnings call in February, the company has the ability to supply more semiconductor parts when the supply chain constraints catch up with production potential. The autotech sector has tailwinds following the end of covid unlike other tech sectors boosted by covid pull forwards.
indie Semi has built a leading Lidar, radar, etc., autotech play riding this secular wave higher with demand growth drivers in ADAS, vehicle connectivity and electrification. The company confirms Wall St. research that silicon content in autos will surge from $500 per vehicle now to $4,000 in the future for 700% growth over the long term.
While waiting for this bright future, indie Semi forecasts revenue reaching $100 million this year. The company ended Q1'22 on a $88 million annualized run rate suggesting plenty of upside throughout the year after only reporting 2021 revenues of $48 million.
SPAC Pain
As with just about any company going public in the last year, indie Semi trades at the all-time lows on the recession fears. The company has 147 million shares outstanding placing the market cap near $1 billion now.
The stock isn't exactly cheap at 10x sales, but in more normal markets indie Semi would trade at a higher sales multiple for 100% revenue growth in an exciting growth area such as autotech. The valuation is actually compelling when considering the actual revenue targets for 2023 as revenues surge with a strong backlog. Not only do analysts predict 2022 revenues of $111 million to easily top the corporate target of $100 million, but also the projection is for a huge surge in 2023 revenues to $242 million.
The company last reported a backlog of $2.6 billion without providing any update with the Q4'21 earnings. What the company did offer up was a major radar contract with a global automotive radar supplier hinting at a substantial boost to backlog totals. indie Semi bought the Analog Device's Symeo radar division to accelerate the development in this automotive segment.
At some point these autotech plays should start trading based on the backlog or projections for far higher out year revenues. The market hasn't trusted the numbers provided by SPACs in this sector due to unproven results and lofty forecasts. Ultimately though, Intel (INTC) bought Mobileye based on large projections for future growth. Intel paid over $15 billion for a business not yet delivering $1 billion in revenues due to a large backlog with major auto manufacturers.
As the CEO of indie Semi stated on the Q1'22 earnings call, the contracts signed in the recent quarter won't reach revenue generating production until 2026. The backlog is set to rise again while the stock continues to languish at the lows near $6.
Takeaway
The key investor takeaway is that indie Semi is a future winner in the autotech sector. The stock only trades at a minimal 4x 2023 sales targets which is amazingly low for a company with sales growth topping 100%.
The tough market could provide another dip in former SPACs, but investors should start nibbling on indie Semi while holding some capital to buy further weakness.
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This article was written by
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in INDI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock, you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.