SkyWater Technology (SKYT) is back in focus after agreeing to buy the Fab 25 facility, supported by a long term US$1b supply agreement with Infineon, which increases its domestic 200mm foundry capacity.

The recent Fab 25 deal and supply agreement arrive after a sharp run in the stock, with a 90 day share price return of 31.41% and a year to date share price return of 63.22%. The 1 year total shareholder return of 347.01% points to very strong momentum that investors are now weighing against expectations for future execution and risk.

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With the stock now trading slightly above recent analyst targets and supported by very strong one-year momentum, the key question is simple: is SkyWater still undervalued, or is the market already pricing in the next leg of growth?

Most Popular Narrative: 5% Overvalued

Analysts see fair value at $35, just below the last close at $36.61, which puts the current price slightly ahead of their core narrative.

The recent acquisition of Fab 25, backed by a multi-year $1b supply agreement with Infineon, quadruples domestic 200mm foundry capacity and creates a platform to address rising customer demand for secure, U.S. based chip supply, an opportunity amplified by ongoing government and private sector shifts prioritizing supply chain resilience. This is likely to drive top line revenue growth and increase revenue visibility.

Want to see what kind of revenue path, margin profile, and valuation multiple analysts plug in to reach that $35 figure? The key moves in this narrative hinge on slower growth assumptions, much slimmer profitability, and a future earnings multiple that sits far above typical semiconductor peers, all working together to justify today’s fair value.

Result: Fair Value of $35 (OVERVALUED)

However, this upbeat story could be disrupted if Fab 25 integration pressures margins for longer than expected, or if government contract timing creates lumpier revenue than analysts assume.

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Another View: Earnings Multiple Sends A Different Signal

The SWS model that compares P/E ratios paints a sharper picture than the analyst target. SkyWater trades on a P/E of 15.8x, well below both the US semiconductor peer average of 65.1x and the broader industry at 70.7x, which can look inexpensive at first glance.

However, the same model suggests a fair ratio of just 5.4x, meaning the current P/E sits far above where the fair ratio points. That gap raises an uncomfortable question for investors: is the stock cheap against peers or expensive against its own fundamentals?

For a closer look at how this multiple compares across peers and the fair ratio, See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If this mix of strong momentum, potential risks, and possible rewards leaves you undecided, consider reviewing the data now while it is still fresh and weigh it yourself using 2 key rewards and 3 important warning signs

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.