GlobalFoundries Earnings: Near-Term Headwinds Look Manageable, Shares Fairly Valued

No-moat GlobalFoundries reported first-quarter results consistent with our expectations. While management reiterated its view that the first quarter would be the low point of revenue for 2023, it now anticipates a slower recovery to normalized inventory and demand levels than previously expected. We view this more conservative outlook as more in line with our estimates, as we have been skeptical of a sharp recovery in demand in the second half of 2023 given assorted macroeconomic headwinds. Although we now expect GlobalFoundries’ revenue to decline about 4% in 2023 (versus up modestly previously), we model a stronger recovery in 2024 and thereafter. Shares fell nearly 7% following the release of the results and now trade close to our unchanged fair value estimate of $55.