Transcription
Back to Market on Close. I'm Sam, live from the floor of the New York Stock Exchange. It's time now for overlooked stocks. So we're watching shares of United Microelectronics rallying today after releasing some December and 2025 sales data. So I'm joined by George Siller, senior correspondent for the details on this one. So we're up about 10%, eight bucks and change. Just talk us through these sales numbers. Why it's so significant.
Well, I think the company's significance is tied to the semiconductor stack in the realm of the foundries that are performing exceptionally well. I mean, if you look at companies like Taiwan Semiconductor, Intel is actually catching a significant bid as of late. And one of the things about UMC is it is a Taiwan semiconductor foundry company. It's actually quite a bit smaller than Taiwan Semiconductor or TSM. They do manufacture and sell integrated circuits that support the design for mobile and wireless communications, wearables, data processing, as well as the automotive end market. So they seem to focus a little bit more on the what are called long cycle, long cycle specialty products like wearables, for instance, versus the advanced node products that Taiwan Semiconductor, which is the primary manufacturer of foundry for Nvidia's chips supply. So they are in the different aspects of the semiconductor stack. They're they're nanometer. Nanometer nodes are not necessarily as technical or advanced like like TSMC are. But nonetheless, they've got a very diverse customer base, which includes companies like AMD and Broadcom. But they did report essentially not necessarily a quarterly report. They actually gave unaudited guidance in terms of their full fiscal year for 2025. They actually noted only 2.5% increase in sales, which I suggest is actually enough to actually project push the stock to the upside. Today, nearly nearly 10% based on this news. I think it comes down to this name being tied into the group, which includes Intel, which is having a a nice day as well. As of late, you're starting to see some some big pickup this this year, the sort of January effect in TSM and even some of the other lithographic manufacturers like ASML.
Yeah, it's interesting because as you mentioned, I mean, this stock is rallying obviously off the back of some of these sales numbers. You've got Intel higher as well. A few of the chip names are up. But broadly as a group down today off the back of what has been a pretty stellar three day run for this entire sector. When you look at this sort of index as far as semiconductor chips, I'm just wondering, you know, what, this grind higher, you say, you know, obviously this is an overlooked stock because it is comparable to TSMC as far as being a Taiwanese company. So I suppose it sort of fits the profile there. But what does it tell us about, you know, what other companies are doing that perhaps don't have the same profile as some of the other big names that we talk about?
Well, I mean, the market's very clever, Sam. So there's always going to be a narrative and a thematic aspect to what's happening. I think that UMC is coincidentally reporting their their year, their fiscal year, top line sales. Again, these are unaudited. This is basically what the company is providing in terms of news that's tied into what I think is going on with Intel, which again, is a is a revolving foundry company. So again, some of the majors are down today, but some of the periphery names and smaller players like UMC and Intel if that, if that makes sense, are moving higher as I think is happening today. I do think at the end of the day also is the market is rewarding stocks that are not in the, you know, the trillion dollar club right now. And that's also, thematically speaking, why I'm seeing we're seeing some stock price action positive wise in companies like UMC. I think the other thing is, if you look at the last five years of this name, the growth really hasn't been there. And if you look at the price action in the last five years, it really hasn't done much. It's been down, but it doesn't necessarily mean it hasn't made money. They have. But one of the factors involved in this stationary price action is their their dividend policy. They've actually paid out about $0.48 of their earnings and dividends. Now, if you look at the fiscal year 25 EPs on an adjusted basis of $0.52, that's essentially over 80% of their income in dividends. So this company seems to be a dividend play on on foundry, if you ask me. That's just my view of it. If you look at their cash position relative to market cap, it's $4 billion market cap at around 20 billion, roughly speaking. So that's a significant portion or about 25% of the market cap in cash, doesn't have a lot of debt revenues, nearly $8 billion in their net income on a trailing basis, around 1.4 billion. So it's more of a value orientated, income orientated tech company, which is kind of unique in this environment because their growth rates aren't really robust. And in fact, just look at the numbers. Rate of change. They reported at 2.6% year over year for 2025 versus 2024. Nothing meaningful. But nonetheless, again, I think there's pickup in this name because of the thematic narrative that I talked about just a moment ago as well.
Yeah, there certainly seems to be a thematic narrative, as and many have been sort of talking about the fact that 2026 would be who we're going to sort of emerge as the winners and the losers here, maybe looking at, you know, others in the space away from the big names that have been working last year, even looking at some of the sort of more AI adjacent the back doors into this whole AI trade as well. But I'm just wondering, you know, as you mentioned, as far as the overall performance is concerned, I mean, I see over the course of the last year, I mean, it's up 35% with this move today. But, you know, what are the analysts saying about this? Because, I mean, you're not a huge amount of coverage as far as the sell side is concerned, but I am seeing that some of them are sort of on the fence, unsure. There is a couple of underperformance sell ratings there too.
Yeah, that's the thing. I think the analyst coverage is rather mixed in this name, just based upon the earnings growth and sales growth. If you look at the estimated EBITDA growth for the next fiscal year 2026, they are only expecting around 4.75% consensus wise. If you look at the sales growth, 3.6%. So again, the nature of their products also speaks towards the long cycle specialty areas of the semiconductor ecosystem. You know, wireless communications and wearables, automotive and markets. The automotive end market business is rather competitive. You've got PE you've got Skyworks for instance, as major competitors to UMC. I just think that this is not a growth story for UMC. You're seeing a nice pickup today in price breaking out to new 52 week highs. It certainly could continue here. But I think this is more of an income play to be honest with you based on the dividend policy. And then also like I said, the reason the stock hasn't made any tremendous move in the last five years is they're paying out the majority of their earnings and dividends. And so if that's the case, the money is moving off their balance sheet. And so it's not necessarily being accretive to existing shareholders from a capital intensive basis, but it is from an income divestiture basis.