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2 Laser Systems Stocks to Watch From a Challenging Industry
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The Zacks Laser Systems and Components industry is suffering from challenging macroeconomic conditions globally, weak economic conditions in Europe and a sluggish economic environment in China. Continued economic uncertainty with low PMI numbers in Europe, North America and Japan is impacting industrial demand and capital investments. However, industry participants like IPG Photonics (IPGP - Free Report) and MicroVision (MVIS - Free Report) benefit from upbeat demand from electric vehicles, electronics, semiconductors and healthcare end-markets. Robust demand for high-power continuous wave and pulsed laser for cutting and battery-processing applications, growing demand for high-performance optical devices, and the ongoing proliferation of Generative AI, cloud computing, autonomous driving, IoT and 5G are the key catalysts.
Industry Description
The Zacks Laser Systems and Components industry comprises companies offering high-performance fiber lasers, fiber amplifiers and diode lasers, optical and photonic products, and scanning technology solutions. The key end markets are semiconductors, metrology, advanced communication and medical devices. Industry participants also provide high-precision 3D sensors and system products for inspection and metrology. Moreover, in the medical devices space, laser and other energy-based aesthetic treatments can achieve therapeutic results by affecting structures within the skin. Developing safe and effective aesthetic treatments has resulted in a well-established market for these procedures. The industry also operates in the cyclical surface mount technology and semiconductor capital equipment markets.
3 Laser Systems & Components Industry Trends to Watch
Emerging Applications Driving Demand for Lasers: The industry is benefiting from increasing demand for emerging applications like additive manufacturing, facial recognition, gesture recognition, LiDAR applications and IoT. Advanced lasers, especially those with 3D sensing (3DS) capabilities, are enhancing interactions using technology. Notably, 3DS — the technology that allows users to create 3D printable objects, control games with body gestures and measure objects — is in high demand.
Laser-IoT Combination Supports Efficiency: As industries are increasingly adopting automation techniques, combining lasers with IoT improves operating efficiency. IoT-supported manufacturing equipment is far easier to update with firmware. The combination reduces costs and increases flexibility and reliability manifold by enabling material-handling capabilities through remote sources. Strong demand from semiconductor and allied markets, which are seeing a rapid shift toward the production of micro and nano devices, is another positive for industry participants.
Challenging Macroeconomic Condition Hurts Prospect: Industry participants suffer from sluggish capital spending by original equipment manufacturers. Moreover, persistent inflation, energy headwinds in Europe and weakness in China are expected to hurt industry participants in the near term.
Zacks Industry Rank Indicates Dim Prospects
The Zacks Laser Systems and Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #175, which places it in the bottom 30% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bearish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are pessimistic about this group’s earnings growth potential. Since Nov. 30, 2023, the Zacks Consensus Estimate for the industry’s earnings estimate for 2024 has declined 93 cents to a loss of 43 cents per share.
Despite the lackluster outlook, there are a few stocks worth watching in the industry. But before we present the top industry picks, it is worth looking at the industry’s shareholder returns and current valuation first.
Industry Underperforms Broader Sector and S&P 500
The Zacks Laser Systems and Components industry has underperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has declined 15.2% over this period against the S&P 500’s rise of 20.6% and the broader sector’s growth of 23.9%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month P/S, which is a commonly used multiple for valuing Laser Systems and Components stocks, we see that the industry is currently trading at 7.67X compared with the S&P 500’s 5.62X. It is also trading above the sector’s trailing 12-month P/S of 7.57X.
Over the last five years, the industry has traded as high as 7.81X and as low as 5.04X, with a median of 6.15X, as the charts below show:
Trailing 12-Month Price-to-Sales (P/S) Ratio
2 Laser Stocks to Watch
IPG Photonics: This Oxford, MA-based company is suffering from lower materials processing sales due to weakness in cutting and welding applications. Declining demand in key markets like e-mobility, particularly in China, and intense competition are negatively impacting top-line growth.
Emerging products like LightWELD are expected to drive future sales. IPG Photonics’ success in the EV battery manufacturing sector, supported by advanced laser welding solutions and strategic partnerships with companies like Miller Electric for handheld welding solutions, is expected to drive top-line growth.
IPGP shares have lost 24.2% year to date. The Zacks Consensus Estimate for this Zacks Rank #3 (Hold) company’s fiscal 2024 earnings has increased 15% to $1.53 per share over the past 30 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: IPGP
MicroVision: Redmond, WA-based MicroVision is a well-known provider of MEMS-based solid-state automotive lidar technology and ADAS solutions. The stock has declined 65% in the year-to-date period.
MicroVision benefits from a diversified portfolio. It offers multiple technology nodes with the highest resolutions and the smallest form factor LiDAR with its MEMS-based long-range MAVIN and small form factor short-range sequential flash-based MOVIA LiDAR product lines.
The Zacks Consensus Estimate for MVIS’ 2024 loss has been unchanged at 49 cents per share in the past 30 days. MicroVision currently has a Zacks Rank #3.
Price & Consensus: MVIS
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2 Laser Systems Stocks to Watch From a Challenging Industry
The Zacks Laser Systems and Components industry is suffering from challenging macroeconomic conditions globally, weak economic conditions in Europe and a sluggish economic environment in China. Continued economic uncertainty with low PMI numbers in Europe, North America and Japan is impacting industrial demand and capital investments. However, industry participants like IPG Photonics (IPGP - Free Report) and MicroVision (MVIS - Free Report) benefit from upbeat demand from electric vehicles, electronics, semiconductors and healthcare end-markets. Robust demand for high-power continuous wave and pulsed laser for cutting and battery-processing applications, growing demand for high-performance optical devices, and the ongoing proliferation of Generative AI, cloud computing, autonomous driving, IoT and 5G are the key catalysts.
Industry Description
The Zacks Laser Systems and Components industry comprises companies offering high-performance fiber lasers, fiber amplifiers and diode lasers, optical and photonic products, and scanning technology solutions. The key end markets are semiconductors, metrology, advanced communication and medical devices. Industry participants also provide high-precision 3D sensors and system products for inspection and metrology. Moreover, in the medical devices space, laser and other energy-based aesthetic treatments can achieve therapeutic results by affecting structures within the skin. Developing safe and effective aesthetic treatments has resulted in a well-established market for these procedures. The industry also operates in the cyclical surface mount technology and semiconductor capital equipment markets.
3 Laser Systems & Components Industry Trends to Watch
Emerging Applications Driving Demand for Lasers: The industry is benefiting from increasing demand for emerging applications like additive manufacturing, facial recognition, gesture recognition, LiDAR applications and IoT. Advanced lasers, especially those with 3D sensing (3DS) capabilities, are enhancing interactions using technology. Notably, 3DS — the technology that allows users to create 3D printable objects, control games with body gestures and measure objects — is in high demand.
Laser-IoT Combination Supports Efficiency: As industries are increasingly adopting automation techniques, combining lasers with IoT improves operating efficiency. IoT-supported manufacturing equipment is far easier to update with firmware. The combination reduces costs and increases flexibility and reliability manifold by enabling material-handling capabilities through remote sources. Strong demand from semiconductor and allied markets, which are seeing a rapid shift toward the production of micro and nano devices, is another positive for industry participants.
Challenging Macroeconomic Condition Hurts Prospect: Industry participants suffer from sluggish capital spending by original equipment manufacturers. Moreover, persistent inflation, energy headwinds in Europe and weakness in China are expected to hurt industry participants in the near term.
Zacks Industry Rank Indicates Dim Prospects
The Zacks Laser Systems and Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #175, which places it in the bottom 30% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bearish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are pessimistic about this group’s earnings growth potential. Since Nov. 30, 2023, the Zacks Consensus Estimate for the industry’s earnings estimate for 2024 has declined 93 cents to a loss of 43 cents per share.
Despite the lackluster outlook, there are a few stocks worth watching in the industry. But before we present the top industry picks, it is worth looking at the industry’s shareholder returns and current valuation first.
Industry Underperforms Broader Sector and S&P 500
The Zacks Laser Systems and Components industry has underperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has declined 15.2% over this period against the S&P 500’s rise of 20.6% and the broader sector’s growth of 23.9%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month P/S, which is a commonly used multiple for valuing Laser Systems and Components stocks, we see that the industry is currently trading at 7.67X compared with the S&P 500’s 5.62X. It is also trading above the sector’s trailing 12-month P/S of 7.57X.
Over the last five years, the industry has traded as high as 7.81X and as low as 5.04X, with a median of 6.15X, as the charts below show:
Trailing 12-Month Price-to-Sales (P/S) Ratio
2 Laser Stocks to Watch
IPG Photonics: This Oxford, MA-based company is suffering from lower materials processing sales due to weakness in cutting and welding applications. Declining demand in key markets like e-mobility, particularly in China, and intense competition are negatively impacting top-line growth.
Emerging products like LightWELD are expected to drive future sales. IPG Photonics’ success in the EV battery manufacturing sector, supported by advanced laser welding solutions and strategic partnerships with companies like Miller Electric for handheld welding solutions, is expected to drive top-line growth.
IPGP shares have lost 24.2% year to date. The Zacks Consensus Estimate for this Zacks Rank #3 (Hold) company’s fiscal 2024 earnings has increased 15% to $1.53 per share over the past 30 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: IPGP
MicroVision: Redmond, WA-based MicroVision is a well-known provider of MEMS-based solid-state automotive lidar technology and ADAS solutions. The stock has declined 65% in the year-to-date period.
MicroVision benefits from a diversified portfolio. It offers multiple technology nodes with the highest resolutions and the smallest form factor LiDAR with its MEMS-based long-range MAVIN and small form factor short-range sequential flash-based MOVIA LiDAR product lines.
The Zacks Consensus Estimate for MVIS’ 2024 loss has been unchanged at 49 cents per share in the past 30 days. MicroVision currently has a Zacks Rank #3.
Price & Consensus: MVIS