CNBC’s Jim Cramer on Friday recommended that investors grab shares in GlobalFoundries, a chip maker owned by Abu Dhabi’s sovereign wealth fund that went public the day before.
The Mad Money host said he thought the deal went a little under the radar, a surprise given that it was the third largest IPO of the year and the global economy is still in a chip crisis.
“I think the semiconductor shortage will last a lot longer than we’d like. This is bad news for the global economy, but fantastic news for GlobalFoundries. So I think it’s a purchase, ”said Cramer.
GlobalFoundries’ business, like any chipmaker in the past, was expensive and had a relatively low margin, Cramer said. However, Cramer said the company’s financials have improved over the years and are now “doing incredibly well” in 2021.
Revenue for the first six months of 2021 grew more than 12% year over year, Cramer said. “If anything, the preliminary results for the third quarter look even better. We are probably expecting revenue growth of 55% … and EBITDA growth of 80%, that’s insane.”
“When you put it all together, there’s a lot to like,” said Cramer, who also highlighted GlobalFoundries’ activities in the US at a time when moving supply chains to America was a big talking point. Additionally, the company’s chips are “linked to some of the best secular trends in the world,” such as cars and smartphones, he said.
Cramer is not without concerns to GlobalFoundries, including that Mubadala Investment of the UAE still owns roughly 90% of the company.
“The United Arab Emirates are a very close ally of the United States. Problem is, we’re talking about a publicly traded company that’s still essentially … a private equity fund that operates semiconductor foundries.
“The whole group is gutted every time there is a bad downcycle, so you really have to believe that if you own this we will have tremendous long-term demand for chips,” he said.
GlobalFoundries, which valued its IPO at $ 47 per share, closed its debut session slightly in the red on Thursday. However, the stock gained 5% on Friday to close at $ 48.74.