Axcelis (ACLS) Up 66.8% YTD: Will the Rally Continue in 2024?
Axcelis Technologies ACLS is a leading producer of ion implantation equipment used in the fabrication of semiconductors.
The company is witnessing strong momentum on the trading front, with shares having soared 66.8% year to date compared with 49.5% and 25.1% growth of the sub-industry and S&P Composite, respectively.
ACLS’ earnings per share are indicated to increase 32.8% and 7.8% on a year-over-year basis to $7.25 and $7.81 in 2023 and 2024, respectively. The Zacks Consensus Estimate for 2023 earnings per share has risen 3.4% in the past 60 days, reflecting analysts’ optimism. The long-term earnings growth rate is 16.3%.
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The company’s earnings have surpassed analysts’ expectations in each of the trailing four quarters, with an average of 18.5%.
Revenues for 2023 and 2024 are projected to rise 21.3% and 7.8% to $1.12 billion and $1.2 billion, respectively.
Moreover, it is trading 34% below its 52-week high price of $201.00, reflecting upside potential. ACLS’ PE ratio is pegged at 18.37 below the industry’s ratio of 23.1.
Demand for Purion Products Driving Growth
Robust customer demand for Purion suite of products, especially in the silicon-carbide (SiC) power market is driving the top line performance. The transition to electric vehicles is driving the SiC power device market. This, in turn, is boosting demand for Purion products, especially PurionH200 silicon carbide, Purion XE silicon-carbide systems and Purion M silicon-carbide tool.
In the third quarter of 2023, ACLS reported revenues of $292.3 million, up 6.7% year over year.
Management expects more than 60% of its shipped system revenues from power markets in 2023. It expects nearly 35% of total system revenues to be generated from SiC applications in 2023. The power device market segment represented 39% of the company’s shipped systems revenues in 2022.
In December 2023, ACLS shipped Purion XE high energy and Purion H high current implanters to various fabs in Korea and China for manufacturing of DRAM memory devices. The shipments also included a follow-on shipment to an existing customer in Korea. With these new shipments, the company has expanded its presence in China. All the systems are shipped in the fourth quarter of 2023.
Prior to this, it shipped Purion EXE SiC Power Series 200mm high energy implanter to a Japan-based SiC power device chipmaker in October 2023. ACLS also transported Purion Dragon high current implanter to a leading Europe-based research and innovation center in nanoelectronics and digital technologies in the third quarter of 2023.
Healthy Outlook
Driven by solid growth of Purion Power Series product line, management continues to anticipate revenues for 2023 to be greater than $1.1 billion, up nearly 20% year over year. For the fourth quarter, Axcelis expects revenues to be $295 million.
The firm continues to invest in employees and infrastructure to achieve its $1.3 billion revenue target in 2025. As part of this strategy, it recently set up a new logistics center in Beverly, MA, to boost logistics and warehouse operations. The state-of-the-art facility is designed to provide flexibility for its manufacturing operations, expand customer base and drive growth in the long haul.
Axcelis is working on lowering the cost of goods sold and tightly managing overall spending to boost margin performance. The company expects fourth-quarter gross margin to be 45%. It anticipates 2023 gross margin to be nearly 43.6%.
Headwinds Remain
However, ACLS’ performance is likely to be affected by volatile supply-chain dynamics and global macroeconomic weakness. Increasing expenses toward research and development, and infrastructure are likely to be concerns for this Zacks Rank #3 (Hold) stock.
Key Picks
Some better-ranked stocks worth consideration in the broader technology space are Blackbaud BLKB, NETGEAR NTGR and Watts Water Technologies WTS. Watts Water Technologies sports a Zacks Rank #1 (Strong Buy), while Blackbaud and NETGEAR carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Blackbaud’s 2023 EPS has inched up 1.8% in the past 60 days to $3.86. BLKB’s long-term earnings growth rate is 23.4%.
Blackbaud’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 10.6%. Shares of BLKB have gained 48.8% in the past year.
The Zacks Consensus Estimate for 2023 is pegged at a loss of 9 cents per share for NETGEAR, which remained unchanged in the past 30 days. NTGR’s earnings outpaced the Zacks Consensus Estimate in three of the last four quarters while missing once. The average surprise was 127.5%. Shares of NTGR were down 17.7% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies 2023 EPS has improved by 3.9% in the past 60 days to $8.08.
WTS’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 11.8%. Shares of WTS have jumped 44.4% in the past year.
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