BofA raises eMemory and WT Micro target prices and reiterates Buy

Overview

This is a company research/earnings review report by BofA on Asia-Pacific semiconductor IP and distribution names, covering eMemory and WT Micro. Based on 1Q26 earnings call information, the report points out that process-node migration, continued growth in AI-related products/solutions, and signs of recovery in non-AI areas support higher earnings forecasts, target prices, and reiterated Buy ratings for both companies.

Core views

The main views are: first, eMemory benefits from node migration and higher adoption of technologies such as NeoFuse, strengthening its long-term growth profile; second, WT Micro's 2Q26 revenue growth is still expected to come mainly from datacenter and communications businesses closer to AI servers, and the recovery at Future Electronics brings early signs of a rebound in non-AI business; third, although AI-related business may carry lower gross margins, it has a clear benefit for WT Micro's working-capital returns; fourth, the report believes datacenter business driven by Broadcom TPU can sustain stronger growth for a longer period.

Analysis framework

The report reflects stronger business momentum by raising 2026-2028E revenue, net profit, and EPS forecasts, and updates target prices using DCF and P/E methods respectively. eMemory's target price is based on DCF, assuming a WACC of 7% and a terminal growth rate of 3%; WT Micro's target price is based on 11x 2027E P/E, at the upper-middle end of its historical 4-15x trading range, justified by 2027-2028E operating margins of about 2.0%-2.1%, ROE rising to 26%-27%, and 2026-2028E EPS CAGR of 23%.

Methodology notes

• Valuation methodsDCF

  Valuation method for eMemory's target price

  eMemory's NT$5,500 target price is based on DCF, with key assumptions of a 7% WACC and a 3% terminal growth rate; the valuation method is unchanged from before.

• Valuation methodsP/E multiple

  Valuation method for WT Micro's target price

  WT Micro's NT$320 target price is based on 11x 2027E P/E; the multiple sits in the upper-middle end of its historical 4-15x range, and the report believes stronger growth, improved ROE, and operating margin support this valuation.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• eMemory / 3529 TT / XYLWF

  a semiconductor IP company, covered by the report and reiterated at Buy

  Strengths

  A stronger growth curve driven by node migration, higher NeoFuse adoption, 2027/2028E EPS forecasts raised, target price increased to NT$5,500.

  Weaknesses

  The valuation depends on long-term growth and DCF assumptions; if wafer prices fall or node migration falls short of expectations, licensing revenue and technology adoption speed could come under pressure.

  Comparison

  BofA's 2026/2027E EPS is 12%/3% above consensus, indicating a more optimistic forecast than the market.

  Risks

  Wafer prices may decline due to foundry competition or excess capacity; node migration may be weaker than expected; IP development may be constrained by talent bottlenecks; other memory technologies may replace key solutions/IP.

• WT Micro / 3036 TT / XZOPF

  a semiconductor distributor, covered by the report and reiterated at Buy

  Strengths

  Datacenter and communications businesses drive 2Q26 growth, AI-related business improves working-capital returns, the recovery at Future Electronics brings signs of a rebound in non-AI businesses, and the target price is raised to NT$320.

  Weaknesses

  AI-related business has lower gross margins, distribution business margins are generally thin, and there is a risk of losing customers or suppliers after integrating Future Electronics.

  Comparison

  BofA's 2026/2027E net profit is 26.6%/20.2% above consensus, reflecting a more optimistic view on revenue growth and operating leverage.

  Risks

  A decline in datacenter/server-related revenue; suppliers or customers may shift to other distributors after the Future Electronics integration; potential share dilution pressure.

Key data

• eMemory target priceNT$5,500, previous value NT$4,950Valuation method unchanged, based on DCF.
• WT Micro target priceNT$320, previous value NT$270Valuation method unchanged at 11x 2027E P/E.
• eMemory current price and ratingNT$4,115; C-1-7The table shows BofA ticker XYLWF and Taiwan code 3529 TT.
• WT Micro current price and ratingNT$275.5; B-1-7The table shows BofA ticker XZOPF and Taiwan code 3036 TT.
• eMemory 2027/2028E EPS revision+4% / +5%Reflects stronger revenue growth assumptions.
• eMemory vs consensus2026/2027E EPS 12% / 3% above consensusPartly due to stronger operating performance assumptions.
• WT Micro 2026-2028E net profit revision+20.7% / +14.6% / +7.4%The table shows the new forecasts raised from the old forecasts; the body summarizes this as a roughly 7%-21% increase in 2026-2028E net profit forecasts.
• WT Micro vs consensus2026/2027E net profit 26.6% / 20.2% above consensusSupported by stronger revenue growth and operating leverage, according to the report.
• WT Micro 2026-2028E EPS CAGR23%Used to support the reasonableness of the 11x 2027E P/E valuation.

Impact & implications

The investment implication is moderately positive: the report positions both companies as beneficiaries of AI, datacenter, and semiconductor process upgrades, and believes earnings forecasts and target prices remain supported. eMemory's upside logic mainly comes from node migration and higher IP adoption; WT Micro's upside logic mainly comes from datacenter/server business, Broadcom TPU-related demand, the post-Future Electronics recovery, and improved operating leverage.

Risks

• eMemory faces the risk of wafer-price declines due to foundry competition or excess capacity, especially at 28nm and more advanced nodes, which could compress royalty revenue.
• If eMemory's node migration is weaker than expected, NeoFuse adoption may slow.
• If eMemory IP development is constrained by talent acquisition bottlenecks, its long-term growth potential may be hurt.
• If other memory types replace eMemory's key solutions/IP, its business outlook could weaken.
• If WT Micro's datacenter/server revenue declines, its key growth driver will be affected.
• After WT Micro integrates Future Electronics, suppliers or customers may shift to other distributors, creating market-share loss risk.
• WT Micro faces potential share dilution pressure.
• Investment in Taiwan securities carries risks related to foreign ownership restrictions, exchange-rate and currency-conversion risk, and regulatory and tax risks such as dividend and interest withholding taxes.

What to watch

• eMemory node-migration progress and the pace of NeoFuse adoption.
• Whether eMemory can deliver on 2026-2028E revenue, operating margin, and EPS.
• Whether WT Micro's 2Q26 datacenter and communications revenue growth can continue.
• Whether Broadcom TPU-related demand can support a longer growth run in WT Micro's datacenter business.
• The recovery and integration progress at Future Electronics, and the strength of the rebound in non-AI business.
• The trade-off among WT Micro's working-capital returns, gross margin, and operating margin.
• The impact of foreign ownership limits, exchange-rate changes, and interest-rate changes in the Taiwan market on valuation and financial burden.