Semiconductor packaging and testing major Amkor (NASDAQ:AMKR) has started 2026 with a bang, rising more than 30 percent in the last 5 days and bringing its trailing 12-month returns to 98.5 percent. Why is Amkor stock up so much, and can the shares keep rising from here?
Amkor’s Revenues Up 31%
The largest driver of Amkor’s returns in the past year has been an extremely strong pace of revenue growth over the past two reported quarters. Q3 represented a particularly strong quarter for the business, with revenues rising 31 percent from Q2 to a total of $1.99 billion. It’s worth noting, however, that the year-over-year revenue growth rate was much more modest at about 7.0 percent compared to the year-ago quarter’s revenue of $1.86 billion. Net income followed a similar trajectory, rising from $54 million in Q2 to $127 million in Q3. In Q3 of 2024, Amkor delivered $123 million in net income.
Behind these significant improvements in the business is a surge in demand for advanced semiconductor packaging. As of Q3, packaging services made up 89 percent of Amkor’s revenue, and advanced packaging was specifically cited as a key driver of Q3’s revenue gains. Amkor is also likely to keep benefiting from rising advanced packaging demand stemming from AI and other advanced semiconductor applications for the foreseeable future.
Through 2030, the semiconductor packaging market as a whole is expected to deliver a CAGR of about 10.4 percent, eventually reaching a total size of nearly $71 billion. Advanced packaging, however, is expected to grow at a faster rate of 12.3 percent annually. As a major provider of packaging services that is already seeing rapid growth from demand in advanced packaging, Amkor could be a key beneficiary of these overall market growth trends.
Amkor is also investing heavily in expanding its capacity to deliver advanced packaging solutions. In the Q3 earnings report, management increased its expectations for full-year CapEx to $950 million. The quarter also saw Amkor break ground on a new facility for packaging and testing in Arizona, making it one of several semiconductor businesses making domestic investments to secure their supply chains and reduce the cost impacts of high tariffs.
What’s Happened Recently?
While the above factors have been putting fairly consistent upward pressure on AMKR shares for quite some time, the stock’s sudden additional jump over the past few trading days was kicked off by a Needham analyst upgrading Amkor’s price target from $37 to $50. This large upgrade set off a significant surge in buying activity, leading to above-average volumes and heavy upward pressure on share prices.
Amkor Trading at High 56x Cash Flow
One thing that’s worth noting about Amkor is that the recent price surge and strong trailing 12-month returns have left the stock looking quite expensive. At 42.5 times trailing earnings and 56.7 times cash flow, Amkor is hardly cheap. At $52.72, the stock has also advanced more than 25 percent beyond the analyst consensus price target of $39.22. Though the price-to-sales ratio of 2.0 looks fairly modest, it’s also well above the historical range AMKR has held through most of the last 20 years.
The saving grace of Amkor’s valuation, however, could be its expected earnings growth. Analysts expect a forward EPS growth rate of 26.2 percent, matched closely by forward revenue growth of 27.3 percent. With advanced semiconductor packaging expected to see strong growth over the next several years, earnings at Amkor could keep rising steadily throughout the rest of this decade, putting gradual upward pressure on share prices and closing the gap between the stock’s valuation and its current trailing performance.
Amkor’s Risks Not to Be Underestimated
With the stock trading at such a high price, it’s also worth taking into account the risks Amkor could face going forward. As a semiconductor business whose stock prices have been driven higher on enthusiasm around spending on AI hardware, Amkor could be one of a growing number of firms that are disproportionately exposed to the possibility of an AI-driven selloff. While such a selloff isn’t currently expected, the high valuations and often circular purchase agreements among the top AI tech businesses have raised concerns of a bubble forming around the technology.
Because so much of the stock’s recent returns were tied to just one analyst’s view of the business, it’s also possible that AMKR could face a correction once some of the current investor enthusiasm wears off. Despite expectations of high EPS growth in the not-too-distant future, Amkor is still only expected to post earnings of about $0.42 per share in its upcoming earnings report. Considering that the consensus rating on AMKR is still a hold and only two analysts currently rate it as a buy, the bullish expectations that have been introduced by the recent Needham upgrade may have given the market an overly optimistic outlook on Amkor.
Is Amkor a Buy Now?
Although Amkor appears to be in a position to benefit from the growth of a niche part of the semiconductor market as AI, IoT and other technologies keep moving forward, the gains of the last 12 months may have brought it to an unappealing price for investors seeking undervalued buys. With so much growth already priced into the stock and much of the recent spike being on the strength of a single analyst’s forecast upgrade, Amkor may have a difficult time moving higher without substantial unexpected earnings or revenue beats.
Even so, Amkor remains a seemingly attractive business with several appealing qualities for long-term investors. In addition to being positioned to take advantage of expansion in the semiconductor packaging market, Amkor is already a profitable business that will likely be able to invest as needed in CapEx to drive future growth. Furthermore, Amkor’s ROE is projected to rise from its current level of 7.3 percent to about 10.8 percent over the next three years. As a result, AMKR may still be a good stock to hold or to watch for better entry points in the future.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.