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Axcelis Stock Plunges 16% YTD: Should You Buy, Hold or Sell?
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Axcelis Technologies, Inc. (ACLS - Free Report) has plunged 15.6% year to date compared with the sub-industry’s decline of 4.3%, reflecting underlying challenges for the company. Axcelis is a leading producer of ion implantation equipment used in the fabrication of semiconductors.
Weakness in consumer electronics and EVs vertical has impeded the company’s sales growth momentum. In the first and second quarters, sales declined 0.7% and 6.4%, respectively. ACLS stock is also trading below its 100-day and 200-day moving averages.
Image Source: Zacks Investment Research
Looking at peers’ performance, shares of EMCORE Corporation (EMKR - Free Report) , Entegris Inc. (ENTG - Free Report) and Kulicke and Soffa Industries, Inc. (KLIC - Free Report) have declined 78.2%, 6.1%, and 21.2%, respectively in the year-to-date period.
Price Performance YTD
Image Source: Zacks Investment Research
Softness in Memory Markets is a Concern for ACLS
Axcelis did not generate any systems revenues from the memory market in the second quarter of 2024. Although the company expects a recovery in demand for DRAM chips driven by high bandwidth needs for AI applications, the overall wafer front-end spending in NAND remains soft. This sluggishness in the memory sector does not bode well as it is a critical segment for Axcelis’ ion implantation systems.
Revenues from NAND applications are projected to start improving in 2025. This delay in recovery could impact the company's short-term financial performance and stock price as investors may be concerned about prolonged periods of reduced revenues and cash flow from this crucial market segment.
ACLS Expects Moderation in General Mature & Other Headwinds
Axcelis remains wary regarding the demand trends from the General Mature market segment. The company noted that demand may moderate in the second half of 2024 due to the macroeconomic environment and its impact on customer spending patterns. This uncertainty in demand could lead to fluctuating revenues and affect the overall financial stability of the company.
The demand for image sensors remains healthy in China but is relatively tepid in the rest of the world due to cautious consumer spending.
Axcelis is investing significantly in the Advanced Logic market, which is still in the nascent stage. This multi-year effort is unlikely to yield immediate returns, and there is inherent risk in the company's strategy to gain market share in this underpenetrated area. Long cycles and uncertain adoption rates could delay financial benefits.
ACLS Issues Underwhelming Guidance
For the third quarter of 2024, ACLS estimates revenues of approximately $255 million, which suggests a 12.7% decline from the year-ago quarter. Earnings per share for the quarter are expected to be $1.43, which represents a 28.1% decline from prior year actuals.
For the fourth quarter, the company expects revenues to be slightly above the third quarter. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $260.6 million, suggesting a decline of 16.1% year over year.
Estimates Southbound for ACLS
Given the headwinds surrounding the stock, earnings estimates have been southbound in the past 60 days. In the past 60 days, analysts have decreased their current and next quarter estimates by 12.8% and 24% to $1.43 and $1.49 per share, respectively.
Image Source: Zacks Investment Research
ACLS Gains From Increased Demand for Silicon Carbide
Solid demand for ion implantation systems remains a tailwind, especially in the silicon carbide (SiC) space. SiC is crucial for power applications where efficiency and performance are critical. The company's ion implantation systems are well-positioned to meet this demand, benefiting from the growth in this segment.
Opportunities in AI Data Centers
The company is also capitalizing on emerging opportunities in AI data centers. Recent customer announcements of new silicon carbide-based trench MOSFET products underscore the growing need for high implant intensity technologies, which are a strength of Axcelis. This positions the company to benefit from the increasing power requirements associated with AI and data centers.
ACLS Trading at Lower Multiple
Axcelis presents a compelling investment opportunity with its attractive forward 12-month price-to-earnings ratio of 15.95X, significantly lower than the industry average of 21.68X observed over the past five years. Its forward 12-month price-to-earnings ratio positions Axcelis as a value-driven choice with significant upside potential.
Image Source: Zacks Investment Research
Wrapping Up
Axcelis' strength in the SiC market remains positive. However, at present, there are several factors that investors should consider, including weak performance in the memory market, macroeconomic volatility and heavy reliance on specific markets. These troubles could weigh on the company’s performance and put downward pressure on the stock price if not effectively managed.
Axcelis carries a Zacks Rank #5 (Strong Sell) at present. With declining earnings estimates, the stock is witnessing a negative investor perception. Hence, it might not be a prudent investment decision to bet on the stock at the moment.
Image: Bigstock
Axcelis Stock Plunges 16% YTD: Should You Buy, Hold or Sell?
Axcelis Technologies, Inc. (ACLS - Free Report) has plunged 15.6% year to date compared with the sub-industry’s decline of 4.3%, reflecting underlying challenges for the company. Axcelis is a leading producer of ion implantation equipment used in the fabrication of semiconductors.
Weakness in consumer electronics and EVs vertical has impeded the company’s sales growth momentum. In the first and second quarters, sales declined 0.7% and 6.4%, respectively. ACLS stock is also trading below its 100-day and 200-day moving averages.
Image Source: Zacks Investment Research
Looking at peers’ performance, shares of EMCORE Corporation (EMKR - Free Report) , Entegris Inc. (ENTG - Free Report) and Kulicke and Soffa Industries, Inc. (KLIC - Free Report) have declined 78.2%, 6.1%, and 21.2%, respectively in the year-to-date period.
Price Performance YTD
Image Source: Zacks Investment Research
Softness in Memory Markets is a Concern for ACLS
Axcelis did not generate any systems revenues from the memory market in the second quarter of 2024. Although the company expects a recovery in demand for DRAM chips driven by high bandwidth needs for AI applications, the overall wafer front-end spending in NAND remains soft. This sluggishness in the memory sector does not bode well as it is a critical segment for Axcelis’ ion implantation systems.
Revenues from NAND applications are projected to start improving in 2025. This delay in recovery could impact the company's short-term financial performance and stock price as investors may be concerned about prolonged periods of reduced revenues and cash flow from this crucial market segment.
ACLS Expects Moderation in General Mature & Other Headwinds
Axcelis remains wary regarding the demand trends from the General Mature market segment. The company noted that demand may moderate in the second half of 2024 due to the macroeconomic environment and its impact on customer spending patterns. This uncertainty in demand could lead to fluctuating revenues and affect the overall financial stability of the company.
The demand for image sensors remains healthy in China but is relatively tepid in the rest of the world due to cautious consumer spending.
Axcelis is investing significantly in the Advanced Logic market, which is still in the nascent stage. This multi-year effort is unlikely to yield immediate returns, and there is inherent risk in the company's strategy to gain market share in this underpenetrated area. Long cycles and uncertain adoption rates could delay financial benefits.
ACLS Issues Underwhelming Guidance
For the third quarter of 2024, ACLS estimates revenues of approximately $255 million, which suggests a 12.7% decline from the year-ago quarter. Earnings per share for the quarter are expected to be $1.43, which represents a 28.1% decline from prior year actuals.
For the fourth quarter, the company expects revenues to be slightly above the third quarter. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $260.6 million, suggesting a decline of 16.1% year over year.
Estimates Southbound for ACLS
Given the headwinds surrounding the stock, earnings estimates have been southbound in the past 60 days. In the past 60 days, analysts have decreased their current and next quarter estimates by 12.8% and 24% to $1.43 and $1.49 per share, respectively.
Image Source: Zacks Investment Research
ACLS Gains From Increased Demand for Silicon Carbide
Solid demand for ion implantation systems remains a tailwind, especially in the silicon carbide (SiC) space. SiC is crucial for power applications where efficiency and performance are critical. The company's ion implantation systems are well-positioned to meet this demand, benefiting from the growth in this segment.
Opportunities in AI Data Centers
The company is also capitalizing on emerging opportunities in AI data centers. Recent customer announcements of new silicon carbide-based trench MOSFET products underscore the growing need for high implant intensity technologies, which are a strength of Axcelis. This positions the company to benefit from the increasing power requirements associated with AI and data centers.
ACLS Trading at Lower Multiple
Axcelis presents a compelling investment opportunity with its attractive forward 12-month price-to-earnings ratio of 15.95X, significantly lower than the industry average of 21.68X observed over the past five years. Its forward 12-month price-to-earnings ratio positions Axcelis as a value-driven choice with significant upside potential.
Image Source: Zacks Investment Research
Wrapping Up
Axcelis' strength in the SiC market remains positive. However, at present, there are several factors that investors should consider, including weak performance in the memory market, macroeconomic volatility and heavy reliance on specific markets. These troubles could weigh on the company’s performance and put downward pressure on the stock price if not effectively managed.
Axcelis carries a Zacks Rank #5 (Strong Sell) at present. With declining earnings estimates, the stock is witnessing a negative investor perception. Hence, it might not be a prudent investment decision to bet on the stock at the moment.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.