J.P. Morgan's recent upgrade of ams-Osram to an "overweight" rating signals a significant change in the financial outlook for the Swiss semiconductor firm, driven by advancements in AI photonics and smart glasses technology. The investment bank has raised its price target for December 2027 to CHF23.60, more than doubling the previous target of CHF11.80.
Analysts, led by Craig McDowell, highlighted the company's strong performance, with shares climbing 54% over the past month and closing at CHF18.92 as of May 18. This represents an impressive 141% increase year-to-date, surpassing the performance of other European semiconductor firms such as Infineon Technologies and STMicroelectronics.
The upgrade indicates a more favorable projection for ams-Osram's market share in AI photonics. J.P. Morgan anticipates the company could secure around 25% of the market in co-packaged optics and optical transceivers using Micro LED technology by 2030. This transition could generate approximately €192 million in revenue from AI photonics by the end of the decade.
J.P. Morgan's note pointed out that the credibility of Micro LED as an optical engine is gaining momentum, with interest from major players like Microsoft and Marvell Technology. The bank also expects annual smart glasses revenue to exceed €100 million starting in 2027.
As a result of these developments, J.P. Morgan has revised its revenue forecasts upward by 1% for 2026 to €3.23 billion, by 3% for 2027 to €3.35 billion, and by another 3% for 2028 to €3.55 billion. Adjusted EBITDA estimates were also increased, with rises of 5% for 2026 to €538 million, 11% for 2027 to €594 million, and 12% for 2028 to €664 million. Notably, the adjusted earnings per share forecasts have improved, projecting a loss of €0.19 for 2026 instead of €0.37, while 2027 is expected to show a profit of €0.35, a turnaround from the previous loss estimate.
The valuation supporting J.P. Morgan's analysis is based on an adjusted EBIT of €354 million for 2028, applying a multiple of 13 times. The bank notes this reflects about a 15% discount compared to the median of its European peers. Efforts to refinance and reduce higher-cost debt could potentially decrease annual interest expenses by €80 million to €100 million, should ams-Osram secure investment-grade borrowing costs.
However, the bank also identified potential risks, including slow adoption of Micro LED technology in data centers, weaker demand for smart glasses, competitive pressures in the automotive sector, and ongoing cash flow challenges from restructuring efforts. While the outlook looks promising for ams-Osram, the company must carefully address these challenges as it aims for future growth in a changing market.
Quick answers
How does ams-Osram’s outlook compare to its European competitors?
ams-Osram's stock has outperformed European rivals like Infineon Technologies and STMicroelectronics, with a year-to-date increase of 141%.
What are the projected revenues from AI photonics?
ams-Osram is expected to generate approximately €192 million in AI photonics revenue by 2030, assuming it captures 25% of the market.
When does J.P. Morgan expect smart glasses revenue to exceed €100 million?
J.P. Morgan forecasts smart glasses revenue to exceed €100 million annually starting in 2027.
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MJI Desk
MJI Desk covers consumer tech for MJI News.
