The shares of Globalfoundries After the release of better-than expected Q1 results, and a optimistic Q2 outlook, (NASDAQ:) were up over 4% Wednesday in premarket trading

GFS Q1 adjusted earnings per share were 42c. This is higher than the consensus estimate of 24c. It was slightly more than $1.9 billion. Revenues came in at $1.94 trillion.

According to the company, they reported a 25.3% adjusted gross margin in Q1. Cash and equivalents totaled 3.26 billion.

GFS forecasts that revenue for Q2 will be in the region of $1.96 to $1.99 Billion, exceeding the estimate $1.93B. Analysts expected adjusted EBITDA to range between $705 billion- $745 billion.

“Despite global supply chain challenges, the GF team continues to execute to plan, and we remain on track to deliver a strong year of growth and profitability,” the company said.

Morgan Stanley analyst Joseph Moore said GFS delivered “the most significant beat-and-raise quarter since the IPO as revenues came in slightly higher and costs were substantially lower in cost of sales and opex.”

Analyst raised the target price to $72.00 per Share, from $65.00

“This was a very strong quarter with the largest upward revision since the IPO. GFS saw an increase in revenue, gross margin and operating margin. Lower share counts drove EPS up to close to 50% during 1H22. We remain concerned about smartphone weakness at certain customers. However, GFS highlighted strengths in 5G global and 2H. Estimates for next year come up 12%, basically neutralizing the multiple compression from our preview,” Moore wrote in a note.

BofA analyst Vivek Arjaya lowered the price target from $82.00 to $75.00, bringing it down to $75.00. Analyst comments:

“We believe results can soothe investors’ concerns re: (1) n-t macro slowdown impacting GFS utilization (and in turn shipments/GMs): GFS is fully booked through 2023 and noted fungibility of supply in the event of weakness in any market; (2) smartphone/PC slowdown: PC sales did fall 60% QoQ/YoY in Q1 (will likely be the trough) but were more than offset by strength in data center, comms and IoT. Meanwhile in smartphones, GFS did note some normalization in low-end handset market (low/medium end China shipments -30% YoY), but its focus on transition to feature rich handsets enabled double digit QoQ/YoY growth.”

By Senad Karaahmetovic