Wedbush Downgrades Tower Semiconductor Stock To Neutral, Shares Slide

Shares of Tower Semiconductor Ltd.(NASDAQ:TSEM) are trading lower Wednesday after analysts at Wedbush downgraded their rating of the stock. Tower Semiconductor shares are under pressure. Why is TSEM stock retreating? Wedbush Downgrades Tower Semi Wedbush downgraded Tower Semiconductor from an outperform to a neutral rating and maintained a price target of $125. In a note published on Wednesday, hardware and semiconductor analyst Matt Bryson said that high component prices, especially for memory, are a headwind for the Israeli company. Those higher costs can affect mobile revenues, which make up a quarter of its sales. Wedbush believes the fundamental silicon photonics (SiPh) story remains intact, but with shares now trading near the firm's target, upside appears largely priced in. Wedbush continues to view Tower as the leading silicon photonics foundry, with optical demand supported by networking and data center buildouts. Recent reports pointing to shortages of indium phosphide (InP), used in traditional optical solutions, could further support SiPh adoption, as silicon photonics can reduce reliance on InP-heavy designs. The analyst also believes Tower could ramp SiPh revenue faster than the roughly two-year timeline assumed in current models, given strong demand and the timing of equipment installations. Management has indicated that announced expansions are fully supported by customer orders and additional capacity announcements remain possible, though Wedbush said it lacks sufficient visibility to quantify further upside. Why Valuation Is Limiting Upside Wedbush currently values Tower at roughly 25x projected 2027 earnings, a premium to peers such as TSMC and GlobalFoundries. That multiple already reflects the possibility that current earnings estimates may prove conservative. Even under more optimistic assumptions, Wedbush estimates 2027 earnings of roughly $6 per share. Applying a more conservative 20x multiple to that higher estimate still results in a valuation near the current stock price and price target. Tower Semi Shares Slide TSEM Price Action: Tower Semiconductor shares were down 2.53%, trading at $117.58 at publication time, according to Benzinga Pro. Read Next: This Tower Semiconductor Analyst Is No Longer Bullish; Here Are Top 4 Downgrades For Wednesday Image: Shutterstock