UBS Lowers GlobalFoundries Price Target to $55
UBS analyst Timothy Arcuri lowered the price target on GlobalFoundries Inc.
(NASDAQ: GFS) to $55 (from $61) while maintaining a Neutral rating.
“GFS reported revenue at the high end of guidance but guided SepQ revenue to the midpoint of the range, roughly 2% below our estimate as management revised its FY mobile outlook from a HSD decline to LDD, suggesting a sharper step down in 4Q.
GFS still expects to outperform a broader smartphone market that it believes will decline in the mid-teens Y/Y, reflecting continued weakness in lower- and mid-tier devices.
That said, we are somewhat surprised by the magnitude of the impact on GFS given management has consistently characterized its handset exposure as skewed toward the premium segment, which has held up relatively well thus far.
Notably, Home & Industrial IoT continues to absorb wafer capacity originally earmarked for handsets, driving outsized growth in that business, while CID and data center trends are tracking ahead of expectations and management expects SiPho revenue momentum to continue into next year.
Incorporating the updated outlook, we trim our C2026 and C2027 revenue projections slightly, as a more cautious handset outlook offsets strong CID (infrastructure/data center) growth.
Combined with higher opex, this drives a modest reduction in our EPS estimates.
Net, we trim our PT from $61 to $55 as our C2028 EPS comes down to $3.13 vs prior $3.23 and well below the Street $3.56 pre-call (as Street appears to be over-modeling margins), while our multiple compresses as we roll forward our valuation to C2028.
Overall, we remain encouraged by the strength in data center/silicon photonics and we do see grants from the US government as supportive of the critical nature of its technologies, but we find it tough to get excited about the stock at this level.”
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