United Microelectronics Corp (UMC) is the world’s third- largest dedicated chip foundry, with a 7% market share in 2020. The company features a diverse customer base, supplying a wide range of products applied in communications, display, memory, and automotive.
Headquartered in Taiwan, the company operates about a dozen custom fab plants in Asia and holds approximately 14,000 chip IP patents. The firm has been focused on production for the automotive industry as semiconductors for electric and self-driving cars are expected to be a major growth driver for the company.
UMC has a strong balance sheet with $4.4 billion in cash on hand as of the most recent quarter, compared with only $185 million in short-term debt. The company also sports a high current ratio of 2.3. The firm has shown strong earnings growth with EPS growing an average of 45.1% over the past three years.
From a valuation standpoint, the stock appears slightly undervalued with a forward P/E of 18.52. Aside from the past few sessions, the stock had been trending up since late May, leading to a Momentum Grade of B in our POWR Ratings system, but over the longer term, performance has been mixed as seen in the chart below.
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Take a look at the 1-year chart of UMC below with added notations:
Chart of UMC provided by TradingView
UMC has rallied up into a large trading range over the past several months. While in the range, the stock has formed a resistance level at $11.25 (red), and a level of support at $8 (green), creating a rectangle pattern.
UMC is now sitting right in the middle of the range, but at some point the stock will have to either break the resistance or the support. The possible long position would be on a breakout above $11.25. The ideal short opportunity would be on a break below $8.
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UMC shares were trading at $9.19 per share on Wednesday morning, down $0.14 (-1.50%). Year-to-date, UMC has gained 9.02%, versus a 13.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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