JPMorgan raises ams-Osram target price as core business and new growth curve improve in tandem

Overview

This is a JPMorgan company research report and 2Q 2026 update on ams-Osram. The report notes that ams-Osram, a semiconductor company serving smartphones, consumer electronics, automotive, LED, and lighting markets, is benefiting from a recovery in core end markets, an improved financial structure, and growth in new product categories. The analysts believe the investment thesis is beginning to play out and raised the target price to CHF24.40.

Core views

The core views are: first, the core business is delivering steady growth. Although the automotive business still faces a low unit production environment, first-half inventory restocking and more moderate pricing pressure provide support; the industrial business continues the strong momentum seen in the first quarter, especially driven by horticulture applications; the consumer business is skewed toward the premium market and benefits from upward revisions to iPhone shipment expectations. Second, balance sheet improvement and refinancing are expected to reduce interest costs in both cash flow and the income statement. Third, increasing market evidence for Smart Glasses and Micro-LED interconnect makes the long-term growth drivers more credible.

Analysis framework

The report updates its investment conclusion based on the company's latest communications, modest upward revisions to revenue and profit forecasts for 2026 to 2028, changes in interest costs after refinancing completion, the impact of announced asset sales, and a 2028 EBIT multiple-based valuation framework. The analysis also compares JPMorgan's forecasts with market consensus and breaks down revenue and margin changes across business lines such as OS, CSA, and L&S.

Methodology notes

• Valuation framework2028 EBIT multiple valuation

  Based on the 2028 EBIT forecast, a 12.5x valuation multiple is applied to derive the December 2027 target price.

  JPMorgan uses a 12.5x 2028 EBIT valuation multiple, representing about a 25% discount to European peers, and incorporates the announced asset sale and expected proceeds from the Infineon disposal to arrive at a CHF24.40 target price.

• Forecast revisionRevenue, EBITDA, and EPS forecast adjustments

  Update financial forecasts for 2026 to 2028 based on company communication, refinancing, and asset sales.

  The report raises group revenue forecasts by about 1% to 2%, increases adjusted EBITDA forecasts by about 3%, and significantly lifts adjusted EPS from a low base due to lower interest expense.

• Business driver analysisCore business and new growth curve decomposition

  Separately assess core demand in automotive, industrial, and consumer electronics, as well as the long-term opportunities in Smart Glasses and Micro-LED interconnect.

  The core business is used to validate the earnings recovery in 2026, while the new growth curves are used to assess revenue and profit elasticity from 2026 onward through the end of the decade.

Asset mapping & comparison

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

• ams-Osram equity / AMS.S

  Directly covered target

  Strengths

  The core business is showing signs of recovery in automotive, industrial, and premium consumer electronics; the balance sheet is improving; Smart Glasses and Micro-LED interconnect provide long-term optional growth.

  Weaknesses

  Free cash flow and earnings quality remain under pressure in 2026, and the path to achieving the 2030 semiconductor division margin target is not yet fully clear.

  Comparison

  The valuation uses 12.5x 2028 EBIT, about a 25% discount to European peers; the report believes this discounted valuation can still support a CHF24.40 target price.

  Risks

  Slower-than-expected adoption of new applications, intensified automotive competition, weaker smartphone demand, or failure to complete the Kulim II sale or secure lower-cost refinancing.

• Smart Glasses-related business

  Long-term growth driver

  Strengths

  Evidence of market size is increasing, with adoption potentially expanding beyond an annual shipment base of about 15 million units, while Micro-LED engines may increase content value per device.

  Weaknesses

  Current revenue contribution remains very small, estimated at only low tens of millions of euros in 2025.

  Comparison

  Compared with the traditional core business, Smart Glasses is more of a long-term growth option and has a magnifying effect on improving valuation sentiment.

  Risks

  Slower adoption, lower-than-expected market share, or customer exclusivity arrangements limiting the addressable market.

• Micro-LED data center interconnect

  Emerging growth opportunity

  Strengths

  It could become an alternative to laser-optics solutions in data center interconnect, and Credo's commentary on the market potential for Active LED-Cables supports the long-term opportunity.

  Weaknesses

  The opportunity is still at an early stage, and ams-Osram has not yet disclosed specific partners.

  Comparison

  Compared with Smart Glasses, this opportunity is earlier stage but potentially larger in market size.

  Risks

  Delayed technology adoption, lower-than-expected market share, difficulty expanding partnerships, or initial commercialization occurring later than expected.

Key data

• RatingOverweightThe report maintains or reiterates an Overweight view and believes the growth and financial profile are improving.
• Current priceCHF18.47Price date is June 23, 2026.
• New target priceCHF24.40The target price is for December 2027; the previous target was CHF23.60.
• 2026 revenue forecast€3,258mnThe key changes table shows an increase of about 0.9% versus the previous forecast.
• 2027 revenue forecast€3,420mnThe key changes table shows an increase of about 2.0% versus the previous forecast.
• 2026 adjusted EBITDA forecast€556mnRaised by about 3.3% from the previous forecast of €538mn.
• 2027 adjusted EPS forecast€1.07The report shows a significant upward revision from a low base, mainly driven by improved interest costs.
• Medium-term semiconductor margin target2030 adjusted EBITDA margin greater than 25%The report believes the growth target is broadly consistent, but the path to achieving this margin still needs to be observed.

Impact & implications

If the report's judgment plays out, ams-Osram's investment narrative will shift from balance sheet pressure and cyclical trough concerns toward core business recovery, lower financing costs, and new applications opening long-term upside. The target price increase and Overweight rating indicate that JPMorgan believes the current share price does not yet fully reflect the repair in the core business and the improvement in future growth drivers.

Risks

• Adoption of Micro-LED data center solutions may be slower than expected, or ams-Osram may capture less market share than assumed.
• Smart Glasses adoption or penetration may be lower than expected, or the company's share may be below assumptions.
• Competitive pressure in the core automotive market may increase.
• The smartphone end market may slow, affecting ams-Osram's revenue as a component supplier.
• The Kulim II sale may fail to be resolved, or the company may be unable to complete refinancing at a lower interest rate.
• Restructuring and net working capital volatility may continue to weigh on earnings quality and free cash flow.

What to watch

• Whether 2Q 2026 results validate continued growth in the core business and balance sheet improvement.
• The true resilience of automotive demand in the second half after the inventory restocking tailwind fades.
• The sustainability of growth in the industrial business, especially horticulture applications.
• Changes in premium consumer electronics demand and iPhone shipment expectations.
• Broader Smart Glasses adoption and the increase in content value driven by Micro-LED engines.
• The commercialization timeline for Micro-LED interconnect, partner disclosures, and progress with initial customers.
• The extent of the post-refinancing decline in interest costs and the impact of asset sale proceeds on leverage.
• Whether the semiconductor division can approach its 2030 margin target through Simplify savings, scale leverage, and product mix improvement.