X-FAB Silicon Foundries (EPA:XFAB) saw its shares surge by up to 10% on Monday following an upgrade from Kepler Cheuvreux, which moved the stock from a "hold" rating to a "buy" and raised its target price to €10.50 from €4.30.
The stock had reached a 2026 low of €7.22 on July 2 after trading as high as €10.23 on June 12, and remains beneath its 52-week peak of €12.20 while comfortably above its 52-week trough of €4.29, according to Kepler Cheuvreux data. Kepler’s new target is built on a 7-times next-12-month enterprise value-to-EBITDA multiple and represents a 144.2% increase over its prior target. The revised target implies roughly 21% upside from the July 3 closing price.
Brokerage rationale
Kepler Cheuvreux outlined three principal drivers behind the upgrade.
- Mature-node capacity tightening: The brokerage said capacity for mature-node semiconductors is tightening as demand broadens across artificial intelligence, industrial and power management applications. It referenced comments from Melexis, X-FAB’s largest customer, that described demand as strengthening "day after day, week after week."
- Operating leverage underappreciated: Kepler said its bottom-up cost analysis indicates X-FAB’s operating leverage is "materially underappreciated." The firm noted that X-FAB carries roughly 70% fixed costs while utilisation rates sit in the low 60% range, and it projected 2027 EBITDA of $292 million, about 31% above consensus estimates.
- Improving business mix: The brokerage argued that X-FAB’s mix is shifting positively, with AI power infrastructure bolstering the industrial segment and helping to offset cyclicality in the automotive market.
Kepler also pointed to the initial public offering of Silex as evidence that "scarce Western specialty foundry assets can command a higher multiple," and noted that X-FAB offers diversified exposure across CMOS, silicon-on-insulator, microsystems, photonics and wide-bandgap technologies.
Signs of a recovery
According to Kepler Cheuvreux, indicators for mature-node semiconductors "have turned decisively positive," citing announced price increases, improving utilisation and longer lead times as early signals of a recovery that has yet to be fully reflected in X-FAB’s reported results. The brokerage expects the second quarter of 2026 to mark the earnings trough for the company.
Kepler provided multi-year forecasts for X-FAB, projecting revenue of $838 million in 2026, rising to $951 million in 2027 and $1.04 billion in 2028. Adjusted earnings per share are forecast at $0.21 for 2026, $0.56 for 2027 and $0.71 for 2028, compared with consensus expectations of $0.10, $0.30 and $0.50 for the same years, respectively.
The upgrade and the revised forecasts reflect Kepler Cheuvreux’s view that improving demand dynamics, operational gearing and a more resilient business mix will support X-FAB’s recovery over the coming years.