“indie exceeded consensus revenue forecasts in Q3, despite the persisting near-term challenges impacting the Automotive Industry… Crucially, the market for indie’s innovative portfolio remains strong, driven by the long-term catalysts of Advanced Driver-Assistance Systems (ADAS), In-Cabin User Experience and Electrification.”
-- Donald McClymont, indie Semiconductor Co-Founder/CEO
Like Impinj Inc. (PI) at $60, when it signaled the bottom was in due to the secular tailwinds of IOT, so too is indie Semiconductor (INDI) calling the bottom in the Auto & Industrial space for the company. Meanwhile its competitors are still complaining about lagging business trends. Let’s explore.
indie is a fabless designer, developer and marketer of automotive semiconductors for the Autotech Industry focused on advanced silicon-solutions for new and emerging vehicle designs. As CEO Donald McClymont noted above, there are some massive secular trends backstopping the company:
indie is run by former Skyworks guys, CEO Donald McClymont and Chief Technology Officer Dr. Scott Kee. They know how to scale a company, with new disruptive products targeting NUMEROUS next-gen opportunities – opportunities with an enormous TAM and a massive served addressable market for indie.
Think about it. On a granular level, the amount of silicon to be found in today’s automobiles dwarfs the cars of the ‘90s and Aughts. As advanced features like ADAS, Electrification, and enhanced In-Cabin User Experiences are integrated into newer models, the amount of chips required to support and power these functions will grow exponentially.
indie reported solid Q3 numbers on November 7, given the documented challenges the overall Automotive Industry is facing that include the high-cost of credit affecting the Consumer as well as “ongoing elevated levels of vehicle and semiconductor inventory.”
More importantly, indie’s strong design wins in the quarter reflect that its disruptive product portfolio is clearly resonating with the Global OEM and Tier 1 customer base. Take a look at some of the highlights:
As ADAS begins to exit the realm of fantasy and enter our roads and reality, a key driver behind indie’s success and market-share gains in the space is its unique offering. During the Q2 Call in August, McClymont noted:
“I want to point out that indie is unique and differentiates itself from its competitors as being the only chip vendor offering all four of the key ADAS sensors – Radar, Vision, LiDAR and Ultrasound – which gives us the unique ability to offer any combination of these sensors.
This will enable the scalable ADAS processing architectures that carmakers are demanding for deployment across their portfolio. This gives us the ability to fuse multiple modalities into a single chipset solution.”
This versatile and comprehensive package of ADAS sensors also helped boost indie’s strategic backlog up to $7.1B (+12% YoY), a number that has grown from $4.3B in 2022, to $6.3B in 2023, to current all-time highs. Investors need only look to the steady and impressive annual growth in the backlog for confirmation of indie’s growing market-share and industry-leading silicon solutions. Given this strength, McClymont added some longer-term projections saying:
“Based on our strategic backlog today, we would expect to achieve annual revenue of greater than $700M in 2028.
ADAS wins comprise over 72% of our updated strategic backlog with In-Cabin User Experience and Electrification accounting for the balance.”
We think the time to begin a long-term starter position in INDI is now.
In addition to the impressive growth in its strategic backlog, new global regulations and vehicle assessment programs from NHTSA and Euro NCAP are creating strong underpinnings for the Safety and Electrification vehicle megatrends. Add to that the relative strength of Chinese EVs, in particular, whose demand for indie’s chipsets, remained strong in Q3, and it’s no wonder that management anticipates:
“A return to our industry-leading growth trajectory in 2025 and beyond.”
Forward numbers are turning higher again, catalyzing two years of big growth – 35% CAGR the next 3 years is likely – ahead with multiple new product launches with top tier OEMS like BMW, GM, F, BYD in China.
Of note, newly-appointed CFO, Raja Bal, made the point on the call to emphasize indie’s “intensifying focus on operational efficiency and expense management” to identify potential cost-improvement opportunities in the manufacturing, engineering and administrative areas.
“This is one of the highest priorities for the executive team and particularly important as we navigate the current market environment. We look forward to providing updates as we progress on this front.”
With the company calling out aggressive near-term initiatives to pull profitability in sooner, this is the reason to be buying in now. Once indie has 1-3 quarters of profitability, hundreds of new funds will be able to buy in as well. We want to be in front of that buying.
As you can see below, once indie’s revenues cross from $70M to $80M in Q3’25, there is tremendous leverage in their model. EBITDA is expected to jump 257% to $10.51M and the company should turn profitable on an Adj EPS basis.
On an annual basis, we expect a huge earnings inflection to $0.40 in 2026 and $0.60 cents in 2027. Keep in mind, Management already alluded to “annual revenue of greater than $700M in 2028.”
Put a 15x multiple on $0.60 and you get a $9 stock. A 20x multiple moves it to $12.
Also, as INDI moves above a $1B market cap next year, we will have index additions to look forward to as additional catalysts. Furthermore, a host of new funds will buy into INDI once the $1B, and then, $2B market cap levels are breached to upside.
Take a look at current annual estimates for 2025 and 2026:
Technically, the stock registered its highest weekly volume EVER, a 232% surge over the average weekly volume – a sure sign to us that INDI has become a different stock and the bottom is IN. A breakout of the current Descending Wedge pattern suggests a move to the $15-$16 level, buttressing our fundamental analysis above.
We are scaling into INDI with a small starter-position, which we plan to add to incrementally as the growth story unfolds.
We plan to add our position as price takes out the 40wk SMA (200day SMA on the daily) and then again at the ~6.25 level, when the stock takes out upper trend-line resistance.
Stop Loss: $3.95. This represents a $1 Risk vs $4-$7 Reward.
The Trump Tariffs are the Elephant-in-the-Room, the biggest risk to the INDI story. They are coming. The question is how high they turn out to be. In a high-tariff scenario, Auto could be one of the hardest hit sectors in the market. Trump is also less concerned with environmental issues, which could delay the EV/Electrification portion of the INDI story.
A recessionary environment is also a risk. If the Fed’s “soft-landing” turns sour, consumer demand for new vehicles will decline and OEMs and Tier Ones may push some programs further out to the future.
There was a high Short Interest coming into the Q3 Reports, so some of the volume on the day was surely short-covering. However, given the quality of the report as well as management comments, we believe the bottom is in for INDI and the shorts have overstayed their welcome.
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Disclosure: We are long INDI stock and calls. We may change our positioning at a moment’s notice, without notifying you of any such moves.
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