Why Indie Semiconductor Rallied This Week

Shares of Indie Semiconductor (NASDAQ: INDI) rallied this week, up 17.7% as of 12:21 p.m. ET on Thursday, according to data from S&P Global Market Intelligence.

Small-cap stocks often have larger potential upside than their larger-cap peers, merely because of their size and room to grow. The flip side is that they often carry higher risk.

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At first glance, Indie's results don't look so special. But one Wall Street analyst sees big things in the future stemming from recent customer wins.

Over 100% upside, according to Benchmark

On Wednesday this week, sell-side analyst Cody Acree of the firm Benchmark wrote a positive note on Indie, while increasing his price target on the stock to $8, from $6.

Indie makes specialty chips for automotive vehicles, mostly in advanced driver assist (ADAS) technologies, and also for fast-charging and infotainment applications. As the auto sector has slowed down over the past couple of years, Indie's revenue has slowed, and the company has continued to be unprofitable.

However, Acree sees much better things in the future, pointing to Indie's "differentiated technology, robust design win pipeline, aggressive operational efficiency initiatives, and strategic positioning across global markets (including China)."

The new $8 price target is a bit more than 100% upside from today's stock price of $3.73. But before you dismiss that target as overly optimistic, keep in mind that Indie's all-time high is $16.33, realized at the height of the pandemic in 2021.

Image source: Getty Images.

Semiconductors price the future before it happens

Investing in chip stocks is difficult, with small-cap chip stocks being even more so. The sector is highly cyclical, and chip stock prices tend to move higher or lower often before results show up in financial statements.

It appears Acree has assessed Indie's technology, and sees an upcoming recovery in the beaten-down auto industrial chip market. Aggressive, risk-on investors interested in semiconductors may therefore want to take a look at Indie.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.