This has been a good year for smaller providers of capital equipment to the semiconductor industry, with names like Brooks (NASDAQ:BRKS), Ultratech (NASDAQ:UTEK), Rudolph (NASDAQ:RTEC), MKS (NASDAQ:MKSI) and Orbotech (NASDAQ:ORBK) up around 20% to 30%. Advanced Energy Industries (NASDAQ:AEIS)
has left them in the dust, though, as this company has seen its share
price improve almost 60% year to date, and over 75% over the past year.
Better still, this isn't just sizzle and hot air - orders for upgrades
and expansions tied to new 3D chip architectures are driving real,
honest-to-goodness growth in the semiconductor business and solid
margins as well.
How much further can it go? Semi
cap equipment is even more cyclical than semiconductors, and the stocks
tend to overshoot (sometimes wildly) both to the good and to the bad). I
like the prospects for design wins extending AEIS's run of
semiconductor growth, just as I like the prospects for advanced 3D
architectures to expand the market. I'm also bullish on the potential of
markets/end-users like OLEDs proving to be larger than currently
expected.
The "but" is that a lot of this is already in the share price. Valuations have moved up pretty significant from January/February of this year,
and AEIS's valuation already assumes pretty meaningful improvement in
revenue and EBITDA margins. While I'm not ruling out the possibility
that continuing outperformance will drive higher estimates, this looks
more like a growth/momentum/cyclical recovery story than any sort of
value play today.
Read the full article here:
Advanced Semiconductor Needs Driving Advanced Energy Industries
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