12:58 PM EDT, 04/30/2024 (MT Newswires) -- Amkor Technology ( AMKR ) is set to see an H2 recovery due to increased communication-related revenue, Morgan Stanley said in a note Tuesday.

Analysts said that the company projects sequential growth in the June quarter, driven by computing and consumer sector expansions, and a strong September quarter due to increased smartphone demand and initiatives like a new consumer wearable program and expanded 2.5D capacity.

Despite earlier mentions of weakness in automotive and industrial microcontroller unit markets, Amkor's ( AMKR ) top-line revenue estimates stay mostly unchanged, reflecting its expectation of an H2 recovery, the analysts added.

In H2, the company is starting manufacturing at its Vietnam facility, which might initially increase costs of goods sold, the analysts said, adding that despite adjustments in gross margin due to depreciation, the trajectory for recovery remains unchanged.

"There are near-term risks around automotive and industrial as well as executing on the Q3 communications ramp, but the long-term idiosyncratic drivers are strong, and we see room to get constructive were the share price to pull back at any point," the analysts said.

They added that their 2024 estimates increase from $6.56 billion revenue, 16.4% gross margin, and $1.70 earnings per share to $6.65 billion revenue, 17% gross margin, and $1.95 EPS. For 2025, the analysts have slightly raised their gross margin forecast to $7.39 billion in revenue, 17.9% gross margin, and $2.61 EPS.

Morgan Stanley adjusted its price target on Amkor Technology ( AMKR ) to $34 from $32 while keeping its equalweight rating.

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