Exclusive eFPGA Hard IP On Intel 18A Platform Will Drive Future Returns

Key Takeaways

• Anticipated eFPGA hard IP contracts and strategic government contracts are set to enhance revenue predictability, profitability, and cash flow.
  
• Unique position with Intel 18A eFPGA and experienced VP of IP Sales seeks to drive revenue growth and improve profit margins.
  
• Revenue and cash flow uncertainties, competitive pressures, and strategic financial decisions could challenge QuickLogic's growth and profitability.

Catalysts

Operates as a fabless semiconductor company in the United States.

• QuickLogic's anticipation of significant rebound in revenue and profitability beginning in Q2 2025 due to new eFPGA hard IP contracts is expected to positively impact revenue and earnings.
  
• The completion and expected award of strategic radiation-hardened FPGA government contracts, with a total potential value of $72 million, could enhance revenue predictability and margins.
  
• The company's unique position as the only provider of eFPGA hard IP optimized for Intel 18A is expected to result in solid returns on investment and contribute to higher revenue and positive cash flow.
  
• Appointment of a new VP of IP Sales with industry experience and relationships is expected to drive revenue through conversion of former Flex Logix customers and new design wins, improving net margins.
  
• The ongoing development of new eFPGA hard IP opportunities and expected storefront revenue is anticipated to support revenue growth and align with the broader industry demand for programmable logic in diverse markets, potentially increasing overall profit margins.

QuickLogic Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming QuickLogic's revenue will grow by 20.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from -19.1% today to 6.7% in 3 years time.
• Analysts expect earnings to reach $2.3 million (and earnings per share of $-0.04) by about March 2028, up from $-3.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 115.5x on those 2028 earnings, up from -23.8x today. This future PE is greater than the current PE for the US Semiconductor industry at 29.4x.
• Analysts expect the number of shares outstanding to grow by 6.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.26%, as per the Simply Wall St company report.

QuickLogic Future Earnings Per Share Growth

Risks

• QuickLogic reported lower-than-expected revenue in Q4 2024 due to delays in contract awards, which might indicate potential risks for revenue consistency in the future.
  
• There are uncertainties regarding the timing of government contract payments and other contract awards, which could impact the company's future cash flow and earnings.
  
• The acquisition of Flex Logix by Analog Devices creates changes in the competitive landscape that could potentially increase market pressure on QuickLogic, affecting its market share and future revenues.
  
• QuickLogic's plan to implement an ATM (at-the-market) offering suggests a potential need for additional financing, which might dilute existing shareholders and impact earnings per share.
  
• Although QuickLogic is exploring options for SensiML (including potential sale), the ongoing uncertainty could affect the strategic direction and financial contributions from this business, impacting overall future profitability.

Valuation

• The analysts have a consensus price target of $11.533 for QuickLogic 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 $13.0, and the most bearish reporting a price target of just $10.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $34.9 million, earnings will come to $2.3 million, and it would be trading on a PE ratio of 115.5x, assuming you use a discount rate of 9.3%.
• Given the current share price of $5.95, the analyst price target of $11.53 is 48.4% higher.
• 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.