Updated: Nov 17, 2020
I recently alerted that I added Axcelis Technologies Inc. (ACLS) stock to my portfolio. I really like this stock and the company's past performance and future predictions.
Axcelis Technologies, Inc. designs, manufactures, and services ion implantation and other processing equipment used in the fabrication of semiconductor chips worldwide.
As you can see below Axcelis Technologies Inc. (ACLS) has been down in revenues for most of 2019. However, for the past 3 quarters, the company has been growing revenues. With that, it has been growing earnings.
2019 was generally a bad year for Axcelis Technologies Inc. (ACLS) but in Q2 2020 Revenue, Net Profits are solid.
ACLS stock Analyst Ratings, Target Price.
The current price for ACLS stock is $27.37. The target price from 6 analysts is $33.
There are 5 'Buy' recommendations and 1 'Hold' recommendation.
ACLS stock Future Earnings and Stock Valuations.
2019 EPS for ACLS were at $0.52
2020: $1.167 (+124%)
2021: $1.563 (+34%)
2022: $2.630 (+68%)
Current P/E ratio for ACLS is $27.37 / $0.52 = 52.6. Just looking at this number, the company looks overvalued. However, if we look at the forward P/E ratios using its current price we will see the forward P/E scores look much more attractive:
ACLS constantly beats earnings estimates. For the most recent Q2 2020 earnings release, it managed to beat expectations again delivering 36% more in earnings than what was expected ($0.39 vs. $0.29 expected). If it continues to beat estimates like that we may see lower forward P/E ratios even faster. As you understand, price will be forced to increase to match a normal P/E ratio for the category which currently stands at 37.
So, using these estimates the stock price for ACLS should triple by the beginning of 2022 (target price of $81).
So, the question is: will ASLS be able to grow earnings at 30-60% after the end of 2022. This obviously impacts the PE at the end of 2022. If the company growth is expected to stall PE may drop to 10. If it is expected to grow at 30-60%, PE will continue to stay in the area of 30-50.
The revenue for ACLS is expected to hit just $600M for 2022 (earnings at $77M) which is obviously quite low for the category. To remind:
Applied Materials (AMAT) revenues currently stand at $16.3B ($3.2B in Net Income)
Lam Research (LRCX) revenues currently stand at $10B ($2.25B in Net Income)
So, as we can see there is still a lot of room for growth for Axcelis Technologies Inc. (ACLS).
Axcelis Technologies Inc. (ACLS) Ownership Breakdown
There is a lot of interest in ACLS stock from Institutions as they hold 86% of the float. Limited public float may mean that the stock will move quickly if there is any sort of hype.
Axcelis Technologies Inc. (ACLS) Word of Caution
For the third quarter ending September 30, 2020, Axcelis expects revenues to be approximately $110 million. EPS is expected at $0.24. This is lower than Q2 revenues and EPS. So, there may be some price volatility in the next 3 months and following the Q3 results release. However, ACLS management is notorious at lowering their predictions to then beat them.
Obviously, this is quite a competitive category and competitors are fighting for maintaining and growing their market shares.
There was quite a lot of insider selling in the past 9 months.
Disclaimer: I own ACLS stock. This post does not suggest or recommend you should buy ACLS stock. I am doing this post to put my thinking on a page. Do your own due diligence before investing.