Summary
- indie Semiconductor reported another strong quarter with revenues surging 74% YoY.
- The GEO acquisition adds a strong automotive camera business for an initial payment of only $180 million.
- The stock is cheap at 3x forward sales.
indie Semiconductor ( INDI ) continues to prove that not all SPACs were bad. The Autotech company reported another solid quarter to end 2022, as the company rides the auto megatrends. My investment thesis remains ultra Bullish on the stock, even after the rally back to the $10 SPAC price.
Source: Finviz
Another Big Quarter
The auto focused semi. company reported Q4'22 sales soared 74% to $33.0 million. Revenues were even up 10% sequentially from a prior record of $30.0 million.
The company has such a massive opportunity in the 3 strategic auto megatrends of ADAS/AV, In-Cabin UX and Electrification for the stock to only trade at the SPAC price. Oddly though, the stock market dumped the SPAC due to a general distaste for any stock coming public in such a manner regardless of the actual results and performance of the business.
indie Semi. reported gross margins jumped to 52.2%, as the company moves to reduce large losses. The Autotech company still had a loss of $15.1 million during the quarter.
The company continues to invest heavily into R&D due to the massive opportunity in this space. The automotive semi. space is forecast to surge from $37 billion TAM in 2022 to $62 billion by 2027. The market where indie Semi. serves has a SAM of $27 billion in 2022 jumping to $48 billion in 2027.
These markets have potentially far more upside with estimates for a luxury car to have ~$700 in tech. content now soaring to over $7,000 over time. The content per car upside is 10-fold in the future.
Due to acquisitions and market share gains, indie Semi. is vastly out gaining the market in the booming Autotech market. The company just acquired the automotive camera company of GEO Semiconductor for $180 million with a potential $90 million earnout payment. The business will add $40+ million to 2023 revenues with an expected close not until the end of Q1.
Important SPAC Lesson
In a swift move from the December low below $6, the stock has soared to close above $10. On the original Autotech hype, indie Semi. traded all the way to $16 back in late 2021.
The market loathed SPACs last year, but investors should've focused on the actual results of the underlying stocks. indie Semi. regularly popped off 100%+ quarterly growth rates, yet the market couldn't find a lot of buyers in the $5 to $6 range last year.
Now, the Autotech is apparently finding the revenue targets for 2023 and 2024 far more legitimate altering the valuation equation for indie Semi. Analysts forecast 2023 revenues reaching $250 million with a jump above $400 million in 2024, partially due to the inclusion of GEO numbers.
The consensus revenue trends haven't really changed much. Investors just never had confidence in the company due to possibly coming public via a SPAC.
indie Semi. has 6 analysts with Buy ratings on the stock. Oddly though, investors never actually bought the stock until recently.
Even with Autotech hype, indie Semi. only trades at ~3x 2024 sales targets. The stock is exceptionally cheap compared to an Autotech leader like Mobileye Global ( MBLY ) recently having the stock spun off from Intel ( INTC ) garnering a far higher forward P/S multiple.
The recent rally appears to suggest the market is more in tune with the bullish analyst estimates and the current $15+ price target on indie Semi. The current rally has big ramifications for other Autotech SPACs ignored by the market and even for indie Semi.
Based on the forecasted growth rates, the stock could easily warrant double the current forward P/S multiple. The company only has a market cap of $1.5 billion with an order book up at $4.3 billion as of November prior to the GEO deal, up from $2.1 billion in the prior year.
Takeaway
The key investor takeaway is that indie Semi. is far too cheap here. The Autotech player with impressive growth shouldn't trade at 3x sales targets, yet the price still appears depressed due to coming public via a SPAC.
For further details see:
indie Semiconductor: Riding Auto Megatrends Higher