USB4 Integration And Data Center Gains Will Unfold Mixed Outcomes

Key Takeaways

• Overoptimism about expansion in data center and AI connectivity, as well as high-speed interface chips, may inflate revenue and margin expectations beyond what is currently sustainable.
  
• Continued market and margin stability depends on consistent IT hardware demand and successful product adoption, while rising costs and intense competition pose significant risks.
  
• Expanding partnerships, portfolio diversification, and innovation in advanced interface standards position Parade for stable, less cyclical growth and increasing profitability across new and existing markets.

Catalysts

Operates as a fabless semiconductor company in South Korea, China, Taiwan, Japan, and internationally.

• Investor optimism may be overestimating Parade's ability to expand in high-growth areas like data center and AI connectivity following the Spectra7 asset acquisition, despite current data center revenues remaining small (~$10 million/year) and the company still being in the early stages of customer engagement-this could lead to inflated expectations of long-term revenue acceleration.
  
• The growth surge in high-speed interface ICs (such as USB4 retimers and hubs) may also be factored into the stock price, with the market extrapolating the recent increase in multi-port adoption per device and broadening OEM engagements as sustainable, potentially overlooking cyclical risks and the pace of broader platform adoption-raising the risk of future revenue disappointment.
  
• Parade's reliance on continued demand growth in core markets like high-end notebooks, monitors, and IT displays assumes persistent IT hardware demand and premium market expansion; if the secular tailwinds from remote work and digitalization lose momentum, earnings visibility and revenue stability could suffer.
  
• Margin resilience may be overestimated as investors price in continued improvement from product mix shifts (towards high-speed/high-ASP products and integration of new solutions like tTED), while underappreciating looming cost headwinds from increased substrate shortages, tariffs, and the higher operational expenses of supply chain regionalization-potentially leading to future net margin compression.
  
• Expectations of Parade successfully leveraging design wins and IP in next-gen protocols (PCIe Gen 6/7, high-speed cabling, OLED Tcon) may be excessive given the intensifying competition from larger semiconductor and custom silicon players, potentially capping mid
• to long-term revenue and gross margin growth.

Parade Technologies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Parade Technologies's revenue will grow by 8.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 16.8% today to 20.1% in 3 years time.
• Analysts expect earnings to reach NT$4.4 billion (and earnings per share of NT$53.19) by about August 2028, up from NT$2.8 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.1x on those 2028 earnings, down from 21.9x today. This future PE is lower than the current PE for the TW Semiconductor industry at 30.3x.
• Analysts expect the number of shares outstanding to decline by 1.57% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.12%, as per the Simply Wall St company report.

Parade Technologies Future Earnings Per Share Growth

Risks

• Accelerated adoption of advanced standards like USB4 and PCIe Gen 6/7 across multiple platforms-combined with Microsoft's USB4 requirements and deeper Parade integration with top OEMs (Intel, AMD, Qualcomm, NVIDIA)-positions Parade to capture secular semiconductor content growth, supporting sustained revenue and margin expansion.
  
• Successful expansion into data center and AI/cloud infrastructure markets, supported by recent Spectra7 acquisition and broadening product portfolio (ACC/AEC cable redrivers, PCIe retimers), creates new high-growth, less cyclical revenue streams, mitigating consumer electronics cyclicality and supporting higher long-term earnings.
  
• Growing design wins and content share with "standard-plus" (Tier 1) customers, as evidenced by large new project wins and ongoing engagement for customized, high-speed interface chips, deepen OEM stickiness and provide visibility for stable to growing revenues over the next few years.
  
• Parade's ability to innovate and validate high-speed IP on advanced nodes (down to 6nm), combined with rapid product development in end-to-end USB4 and PCIe solutions, enhances Parade's technological leadership and gross margin resilience amid evolving industry standards.
  
• OLED and AMOLED display adoption in premium IT devices, where Parade is already a supplier to Tier 1 panel makers, offers a long-term secular growth lever as cost declines and high-end adoption rise, potentially driving higher ASP and improving Parade's revenue mix and profitability.

Valuation

• The analysts have a consensus price target of NT$705.286 for Parade Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NT$866.0, and the most bearish reporting a price target of just NT$450.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be NT$21.7 billion, earnings will come to NT$4.4 billion, and it would be trading on a PE ratio of 15.1x, assuming you use a discount rate of 8.1%.
  
• Given the current share price of NT$792.0, the analyst price target of NT$705.29 is 12.3% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.