United Microelectronics Corp. (UMC) is the world's third- largest dedicated chip foundry, with a 7% market share. The company features a diverse customer base including Texas Instruments (TXN), MediaTek, Qualcomm (QCOM), Broadcom (AVGO), Xilinx (XLNX), and Realtek, supplying a wide range of products applied in communications, display, memory, automotive and more.
On Monday, the company reported its sales for June. Revenue came in at $17.3 million, which was a 18.9% year over year increase from the same month last year. In addition, the global chip shortage may provide the company an opportunity to gain market share from bigger players in the industry.
As of the most recent reported quarter, UMC had $4.4 billion in cash which compares very favorably to only $185 million in short-term debt. The company also has a solid net profit margin of 17.1%. In terms of growth, UMC has grown earnings an average of 34.3% per year over the past five years.
Analysts expect earnings to surge 180% year over year next quarter. From a valuation standpoint, the stock appears a bit undervalued with a forward P/E of 17.79. The stock is up 11.6% for the year, but has shown mixed performance since February as noted in the chart below.
Take a look at the 6-month chart of UMC below with added notations:
UMC has been trading within a large range in 2021 and has moved into a smaller range during recent weeks. While in that range, the stock has formed a resistance level at around $9.80 (red), and a level of support at $9 (green).
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At some point, the stock will either break the resistance or the support.. The possible long position is on a breakout above $9.80. The ideal short opportunity would be on a break below $9.
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UMC shares fell $9.41 (-100.00%) in premarket trading Thursday. Year-to-date, UMC has gained 9.25%, versus a 15.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing.
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