In case you didn’t get the memo, there’s been a semiconductor shortage going on for much of 2021. New York-based GlobalFoundries (NASDAQ:GFS) could help to address this problem in a big way. As a result, enterprising investors might consider a long position in GFS stock.
Stone / United Kingdom – July 9 2020: Global Foundries – semiconductor Manufacturer logo on the printed document and large microchips placed around. Selective focus.
GlobalFoundries, interestingly enough, is a hidden giant in a high-need market. The company has around 15,000 employees, roughly 10,000 patents and five manufacturing sites across three continents.
Moreover, GFS stock just recently had its debut on the Nasdaq exchange. Therefore, you’d think GlobalFoundries should be a famous name on Wall Street and Main Street.
Yet, it’s not, but that’s not a bad thing. There’s an early-stage investing opportunity here, as GlobalFoundries’ public profile should grow quickly in the near future.
A Closer Look at GFS Stock
Before we talk about solving the world’s microprocessor-shortage problem, let’s put the microscope to GFS stock.
On Oct. 27 of this year, GlobalFoundries revealed the company’s initial public offering (IPO) price of $47 per share. Prior to that, the price range had been established at $42 to $47.
GlobalFoundries announced the closing of its public offering on Nov. 1, though the shares had started trading on the Nasdaq on Oct. 28.
One thing’s for sure: GFS stock didn’t stay at $47 for very long. Evidently, IPO mania was in full effect as the stock rallied to $65 on Nov. 4.
The share price ebbed and flowed over the next few days, landing at $62 and change on Nov. 19.
It’s still too early to identify support and resistance levels for this particular stock. New IPO stocks carry elevated risk as the market is still determining an appropriate price range.
So, please don’t load up on GFS stock. The best policy right now is to do your due diligence on the company, and possibly buy a few shares if you feel that GlobalFoundries offers long-term value.
Founding a Foundry
Although the IPO is still fresh, GlobalFoundries has actually been around since 2009.
You could call the company a spin-off of sorts, as GlobalFoundries was formed through a joint venture between Mubadala and Advanced Micro Devices (NASDAQ:AMD).
Over the years, GlobalFoundries became a powerhouse in its own right. Impressively, the company had more than 200 customers in 2020.
Furthermore, the company generated $3.04 billion in revenues – up nearly 13% year-over-year – during 2021’s first half.
With that, GlobalFoundries has become the world’s third-largest semiconductor and microchip foundry by revenue.
On the other hand, the company remains unprofitable. Disappointingly, GlobalFoundries’ net earnings loss during 2021’s first half came in at $301 million.
Thus, GFS stock isn’t a perfect investment. That’s another reason to keep your position size small, even if you have faith in the company.
Two Terrific Team-ups
Even as GlobalFoundries is helping to combat the world’s supply deficit in tech-gadget parts, the company isn’t waging this battle alone.
For instance, GlobalFoundries announced that it’s extending its collaboration with Qualcomm (NASDAQ:QCOM) subsidiary Qualcomm Global Trading PTE. Ltd.
In this team-up, the two companies will continue to develop 5G multi-gigabit-speed radio frequency (RF) front-end products.
Dr. Bami Bastani, senior vice president and general manager, mobile and wireless infrastructure strategic business unit at GlobalFoundries, clarified that the collaborative efforts include “sub-6 GHz to unlock everyday access to 5G” as well as “cutting-edge mmWave technology to take 5G to the next level.”
Meanwhile, GlobalFoundries is reportedly working with automotive giant Ford Motor (NYSE:F) to “advance semiconductor manufacturing and technology development within the United States.”
There are broader implications to this partnerships, as it aims to “boost chip supplies for Ford and the U.S. automotive industry.”
GlobalFoundries CFO Tom Caulfield emphasized that the agreement with Ford will not only spur innovation, but also should “ensure” a “long-term, supply-demand balance” (referring to the tech-parts shortage, presumably).
The Bottom Line
Clearly, there’s a lot to unpack here. You’ve got a still-new IPO, a hidden chip-making giant and a pair of power-packed partnerships.
At the same time, there’s a mixed fiscal picture with robust revenues but a paucity of profits.
What to make of all this? In the final analysis, a small position in GFS stock is speculative but reasonable as GlobalFoundries remains a key player in a persistently high-demand market.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
