Artificial intelligence (AI) was one of the defining stock market themes in the first half of 2023. Positive forecasts, especially from the semiconductor market, boosted the share prices of supposed beneficiaries of this megatrend. However, there are also technology stocks that have missed out on the hype. This group includes ams-OSRAM. The shares of the SIX-listed semiconductor company from Austria fell by more than 4% from January to June. In the meantime, the mid cap even slipped below the CHF 5 mark for the first time since the beginning of 2012. However, ams-OSRAM is certainly playing a role in the field of AI. For example, the company manufactures particularly small and energy-efficient image sensors that are installed in robots. This could do little to change the recent operational slump at the high-tech company. In the first quarter of 2023, ams-OSRAM's revenue shrank by more than a quarter year-on-year to EUR 927 million. At 5%, the operating margin (adjusted Ebit level) was only half of what it had been at the beginning of 2022 (see chart).
The weakening smartphone market had a negative impact at the start of the year. Here, ams-OSRAM can be found on the supplier list of iPhone manufacturer Apple, among others. In the automotive segment, where the company supplies lighting systems or sensors for autonomous driving, for example, management reported a moderate sequential decline. However, this would have been in line with planning. Officials also spoke of "unfavorable results in line with expectations" in the third division, "Industrial & Medical." In addition to medical imaging, this division's large spectrum includes the aforementioned robotics components. "Our markets remain challenging, and unfavorable demand trends are having a negative impact on our business," commented CEO Aldo Kamper on the interim report. Admittedly, he only took over as Group CEO in April. But Kamper knows the company very well. This is true at least for OSRAM; in 1994, the Dutchman had started his career at the Bavarian lighting specialist. When OSRAM was acquired by ams for more than EUR 4 billion in 2020, he was working at automotive supplier Leoni.
Kamper now wants to turn the tide as quickly as possible and comprehensively tap the company's potential. "Our strong technological expertise combined with a highly motivated team is an excellent basis for innovation and further market penetration," the CEO explained during the latest reporting. He expressed "cautious optimism" for the second half of the year. In the quarter just ended, however, business is likely to have shrunk once again. Kamper forecast group sales of EUR 800 to 900 million, with the sale of OSRAM business units having a braking effect of around EUR 80 million. In the meantime, the deconsolidation, which generated EUR 600 million, has been completed. For the margin, the new group leader forecast a range of 3% to 6%. By comparison, 9% of revenues had still remained in adjusted earnings before interest and taxes (Ebit) in the second quarter of 2022. On July 28, ams-OSRAM will publish its interim report for the past quarter and the first half of the year, respectively.
Holders of the new Softcallable Barrier Reverse Convertible can look forward to the payment date with relative calm. The structured product pays a high coupon of 19% p.a. regardless of ams-OSRAM's share price performance. The distribution is made quarterly. The nominal value (CHF 1,000) is partially protected: As long as the underlying does not fall to or below the barrier of 49% of the initial level, full redemption takes place. If, on the other hand, the SMIM security uses up the risk buffer, the partial protection expires. In this case, the investment would be directly linked to the performance of ams-OSRAM. However, even in this scenario, losses do not necessarily have to be incurred. If the underlying is quoted at or above the strike again at the final fixing, the maximum return is maintained. Otherwise, the guaranteed coupon cushions the loss to a certain extent. Please note: Due to the soft callable feature Leonteq may call this issue early.
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