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*correction - valuation of c$4billion estimated (not $m!) - slight difference!
Astera Labs is due to IPO on Nasdaq this week (Weds) - be interesting to see how it does in the US I think a valuation of c$4m being suggested... if so makes Alphawave look cheap at current levels!
Semiconductor connectivity firm Astera Labs (ALAB), which is slated to go public on Wednesday, has boosted the size of its upcoming offering amid increased demand for all things artificial intelligence.
The company now expects to sell 19.8M shares between $32 and $34 each, up from a prior expectation of 17.8M shares between $27 and $30 apiece, the company said in a filing on Monday.
At the high-end of the range, Astera, who counts Intel (NASDAQ:INTC), Nvidia (NVDA) and AMD (AMD) as customers and Intel as a backer, would raise $673.2M.
Astera will trade on the Nasdaq under the ticker symbol "ALAB."
Reports emerged in October that Astera was looking to go public in 2024.
The company generated $115.8M in revenue in 2023, up from $79.9M in 2022. However, it still incurred a net loss last year at $26.3M, down from $58.3M in 2022.
Morgan Stanley (MS) and JP Morgan (JPM) are the lead underwriters for the IPO, with Barclays, Deutsche Bank, Evercore ISI and Jefferies among the other Wall Street firms listed on the filing.
Astera Labs announced in November 2022 that it raised $150M in a Series-D funding round led by Fidelity Management, which valued the company at $3.15B. Fidelity was joined by other existing investors, including Atreides Management, Intel Capital and Sutter Hill Ventures.
Does anyone have an idea please of why Alphawave shares have dropped over 10% this past week?
It's had a bull run with approximately 72% increase since January. So it's taking a breather along with all the other "AI" stocks which have declined by similar amounts in recent days. The drops are more notable from around the time of the US markets opening time. Even Nvidia has taken a drop. Nothing to do with the fundamentals of company.
Does anyone have an idea please of why Alphawave shares have dropped over 10% this past week?
They earlier in the week announced their successful first chiplet-connectivity silicon platform on TSMC’s most advanced 3nm process, so I'm confused as to why this wouldn't at least keep the share price where it was at £1.90?
Fibonacci retracement ratios, are 23.6%, meaning sp value of 171. The ratio of 38.2%, would mean a sp value of 159.
AWE, is a strong equity, so I have not looked at the 50% ratio. Most likely a retracement, would fall somewhere between the two values of 23.6%, 171, and 38.2%, 159. DYOR.
20 day moving average at 169.4, tomorrow, and breach of pivot high(174) of negative divergence price bar of 27/2/24, when low price today was 173.60. The high value of the commodity channel index , occured on 27/2/24, making that price bar the pivot, for subsequent price action. A fall in sp, is expected to follow a negative divergence, and it remains to be seen, whether the sp, will retrace to the 20 day moving average, which is expected to provide some support.
Astera Labs appears to be a similar company to Alphawave. It is about to IPO in the US. It will be interesting to see how it gets on.
Today I’ve been mostly reading about Alphawave and it’s successful collaboration with Taiwan Semi. The future looks good.
Totally agree that Alphawave is an undervalued company. I believe much of the discount comes from the market it listed.
Credo has more than 2x the market cap of AWE despite only generating half the revenue. They compete with AWE in the connectivity space but have more focus on AECs (Active Electrical Cables) which amounts to approximately half their revenue. Like AWE, Credo are ploughing back a lot of cash into R&D and are not net profit making. Credo may appear to have a healthy cash balance sheet but only due to having done a recent cash placing. They are in partnership with Effect Photonics for the development of Coherent DSPs but I believe are behind the curve compared with AWE in bringing these to market.
Marvell has a market cap more than 37x greater than AWE’s. They are AWE’s main competitor in terms of data centre connectivity products. Last Thursday was Marvell’s Q4 results which gave a very upbeat performance in the data centre sector. Unfortunately, this was offset by a shockingly downbeat performance in their carrier infrastructure and consumer sectors neither of which AWE compete in so far as I’m aware. That probably explains the market’s reaction to the Q4 results that brought about a more than 11% fall in share price on Friday. Similarly to both Credo and AWE, Marvell are also not currently net profit making. Again, mainly because a large amount of cash is being ploughed back into R&D and product development.
While the two above-mentioned NASDAQ peers have in my view excellent growth prospects, I think AWE’s growth prospects are at least equally as good. As mentioned in my previous post they should be due at some point later this year to announce their first revenues coming from their Opto-electronics range which will include coherent DSPs, AECs and AOCs. While Marvell appear to be slightly ahead of the curve having already brought coherent 800 Gbps DSPs to the market and are introducing 1.6T Gbps DSPs later this year, I suspect that AWE are not too far behind. The revenue stream expected from this is expected to ramp up quite quickly in the following years.
According to a fairly recent Whitepaper from IPnest, in what’s called the High-End interface silicon IP segment, AWE already command a quarter of that particular addressable market. Back in 2021 this segment was valued at about $370 million and is thought will have grown to around $1.4 billion this year. Assuming no increase in market share, this translates to about $350 million of revenue from that segment alone, add to that, revenue from custom silicon, chiplets and the new opto-electronics range, we shouldn’t be surprised if the company up their 2024 year end guidance by a significant amount, hopefully in excess of $400 million. By 2026, the high-end interface IP segment market is forecast to exceed $2 billion. The whitepaper predicts the company’s revenue will be between $500 million and $800 million. Total product revenue is expected to exceed $1 billion. All the above products have high profit margins.
Like the context you put the company in. AWE should move its listing to NASDAQ.
Just over 12 months ago on 24th Feb, Alphawave closed at an all-time low of 89.3p. From that baseline, the share price is up 110.3%. If we take the price of its Peers on that same date of 24th Feb last year and compare with their respective closing price on last Friday, Rambus is up 134.41%, Broadcom is up 126.57%, Credo is up 111.2% and Marvell is up 72%.
So, one can argue that Alphawave has performed equally as well as its peers over this time frame.
Another interesting comparison I like to make is the price to sales ratio (P/S).
If we take Alphawave's 2023 midpoint guidance revenue of $350 million, last price of £1.878, and 727 million shares in issue. We get a P/S ratio of 5.02 which is significantly lower than its peers.
Based on the absolute latest data from the peers last reports and £to$ conversion of 1.287:
Rambus P/S = 15.25. If AWE were trading on this P/S, its share price would be £5.71
Broadcom P/S = 16.94. If AWE were trading on this P/S, its share price would be £6.34
Credo P/S = 19.7, If AWE were trading on this P/S, its share price would be £7.37
And Marvell P/S = 11.86. If AWE were trading on this P/S, its share price would be £4.44.
Taking the average P/S ratio of these four peers, AWE share price would be £5.97.
Even though AWE has been on a price surge since January 17th and risen 72% since and no doubt various technical indicators are currently screaming "overbought", but regardless of whether a price correction is due or not, at this current price of £1.88, it remains significantly cheap compared to its peers. I'm not a technical analysis fan, but I've seen that the future growth indicator on this stock places it at the top end of the growth shares table.
At some point this year, the company are expected to announce its first revenues from its opto-electronics range including coherent DSPs for its hyperscaler with whom it has a non-binding agreement for at least $300 million worth of product sales in the pipeline. All things data centre connectivity product wise have fairly high CAGR expectations over the coming years but I believe the coherent opto-electronic aspect for intra data centre connectivity applications especially so.
He will be back once the short sellers start their magic.
Barcap has gone awfully quiet
The mood music is definitely changing for Alphawave. I can’t remember too many nice reports over the last few years. Motley Fool have come out with positive opinion today.
The LSE valuation discount is egregious! Credo has been around since 2008, has a negative EBITDA margin, yet gets more than double the multiple assigned to it by investors.
"Absolutely. It is pleasing. Such low volumes though. It only takes a 30k buy or sell to move the price significantly."
If you are comparing with US NASDAQ stocks then yes volumes are low, but if you compare to typical LSE stocks of similar market cap it's actually high. The LSE seems like a second class exchange compared to US markets.
AWE's volume on Friday was 4.8 million, say at an average of about 1.76 = £8.5 million.
Thursday's volume was 9.5 million, at an average of about 1.65 = £15.6 million
This compares with Direct Line Group, which had a volume of 7.7 million at an average of 2.06 = £15.9 million.
Yet Direct Line has nearly 3x the market cap.
There are many others with similar market caps to AWE on LSE with way less volume.
NASDAQ however is a different ball game altogether.
Credo, AWE's nearest equivalent competitor has a market cap of $3.69 billion (AWE's = $1.65 billion), managed a volume yesterday of 2.3 million at an average of about $22.7 = $52.21 million (£41.2 million) which is 3 to 5 times more than AWE's volume.
Nvidia's volume on 22nd Feb was 86.51 million at about $760 average = astronomical $65.75 billion.
Incidentally, if AWE was priced similarly to Credo on P/S ratio, AWE share price would be £4.02 today...
Absolutely. It is pleasing. Such low volumes though. It only takes a 30k buy or sell to move the price significantly.
Clank, I was up the same once but then the Sunday Mail article came out and lost it all. Hopefully it carries on the recovery. GLA
I'm chuffed as I'm up over 70% on this share now. In 2 minds as to whether to take my profit and run though as the share price seems on a roll at the moment.
Another good day.... albeit after US opened. Decent rises on various semiconductor companies over there today. Whether US market is directly driving this sp is up for discussion....or is there something behind the scenes here driving up the sp ?
.... Well, it's been a good few weeks here for sp. My losses are getting less daily, YAY, but still a way to go for me. Hoping the AI frenzy lasts? Many different points of view of course. GLA
BR - great analysis on the psycology of investing. It reminds me of a quote in Ben Graham’s book - my bible - The Intelligent Investor. “In the end how your investments behave is much less important than how you behave”
And just in case any reader here knows the history of Nvidia share prices well, I should clarify my Nvidia example in the previous post takes into account the four for one share split that happened in July 2021. In reality, in March 2020 the shares were trading around $200 not $50 and by July 2021 they were around $750 but reduced to $187.50 while the holding of 50 shares was automatically increased to 200. Personally, I’ve never bought Nvidia shares (unfortunately).
“Thank you. Timeframes it appears.”
You’re welcome. My own two pennies worth on this matter is that it is important to remember that as individual private investors we tend to be far more emotionally involved in the stocks that we choose to invest in while the likes of JP Morgan analysts are just doing their job. It is far easier to hedge on a stock that the analyst may not have a personal investment in. Alphawave Semi has increased by more than 60% in the space of month and a half, so even if the stock has amazing fundamentals and brilliant future growth prospects, based on the average performance of stocks in the wider market, any stock that rises by a significant amount in a short time frame tends to get treated as being overbought regardless of its fundamentals which is why you’ve seen an increase in short positions on Alphawave in the last week or so.
Consider that Nvidia on 20 Mar 2020 was a little over $50. Twenty months later it was trading at almost $330. That’s a 760% increase, And yet from that mighty height it declined to almost $110 less than 11 months later on 14 Oct 22. Imagine if in Mar 2020 you bought $10,000 at $50/share, how euphoric you might have felt in Nov 2021 having stock worth $66,000 and then being deeply dejected seeing it dwindle down to $22,000. At this point you may have decided to sell and preserve the 120% profit you still had.
And then fast forward 16 months to today you see your once beloved stock is now worth almost $800 per share and you’re thinking if only you had left it well alone you’d be sitting on $160,000 worth of Nvidia stock. And all that time in between you considered several times about getting back into the stock but didn’t for fear it had already reached it’s optimum.
These are the kind of emotions and psychology you have to deal with when investing in volatile growth stocks like this. Alphawave Semi will be no different and it’s vital to take that potential volatility into account when considering what your strategy should be.