GlobalFoundries Enjoys Impressive Sales Growth in Q1 That Should Persist in Q2; Raising FVE to $45

GlobalFoundries reported first-quarter results that exceeded management’s guidance and our expectations, thanks to strength in nearly every segment. We like that the firm’s single source wafer shipments grew 48% year over year, as these products have higher switching costs and average selling prices. Although GlobalFoundries has its capacity booked up for both this year and next, we are concerned with softness in smartphone and PC demand as well as inflationary, geopolitical, and pandemic-related headwinds. We are raising our fair value estimate for no-moat GlobalFoundries to $45 per share from $43 per share thanks to the stronger results, but we continue to view shares as overvalued.