Is Axcelis Technologies Stock A Buy?

Axcelis Technologies Inc (NASDAQ:ACLS) is a semiconductor equipment manufacturer at the heart of a lot of industries. It helps chipmakers produce smaller microchips capable of more processing power for applications ranging from media broadcasting to renewable energy, smart automobiles, and industrial components among others.

ACLS share price experienced big gains last year, which is no surprise given that it’s an integral part of the race for 5G, automation, and Internet of Things (IoT). Its components are used in image sensors, DRAM and NAND memory, smart car, and smartphone applications, among others.

That leaves sideline buyers wondering is Axcelis Technologies stock a Buy?

As it turns out, not all its product segments flourished during the epidemic. Food processing and communications equipment sales fell, showing the need to diversify its customer base.

Still, the company experienced minimal year-over-year losses through the pandemic and has new products on the horizon. Its Purion series of high and medium ion current implantations could be foundational to the next generation of computerized technology.

For prospective buyers, it’s best to crunch the big data to see if Axcelis investors will scrap together a profit or their portfolios will short circuit.

Axcelis Technologies: The 10,000 Foot View

Axcelis Technologies is a Beverly, Massachusetts-based semiconductor component and equipment manufacturer that covers a broad range of applications. Modern devices have several common components, whether it’s a commercial solar array, consumer smartphone, or office PC.

Central processing chips act as the brain of the computer, while memory and graphics processing units take some of the burden away. Each of this can be attached to small motherboards and installed in everything.

Even residential light bulbs, garage door openers, and thermostats have computers in them these days.

An estimated 20.4 billion devices were connected to the Internet in 2020, and that number is expected to more than triple over the next five years. By comparison, there are only 7.8 billion people in the world, and only 4.66 billion are active internet users.

Robotics, autonomous cars, automated manufacturing, and other use cases are in full effect in the 2020s. What was once a futuristic vision is now a way of life. And it’s only accelerating more.

Axcelis Technologies provides a wide range of precise, highly pure components that can enable the high level of data processing needed to survive. And because it’s a business-to-business (B2B) supplier, it has larger, long-term contracts with clients that are easier to predict revenue.

This has some bullish investors wondering if now is the time to buy in.

Is Axcelis Technologies Stock A Buy?

Axcelis Technologies had a market capitalization over $1 billion at the start of 2021, with a price-to-earnings (P/E) ratio over 26x. Its share prices fell to a 52-week low of $12.99 during the 2020 market fall, but quickly recovered to over $30.00 per share.

By January 2021, it hit a surge and signaled it could breakout above $40 per share, something that hadn’t happened since 2006. Of course, that doesn’t account for the company’s reverse stock split in 2016, as it struggled to remain competitive in the 2010s.

It’s competitive in the 2020s though, raising guidance for its full year 2020 to $550 million. CEO Mary Puma also raised its guidance for 2021, expecting $650 million sales total by year end.

This means its fourth quarter revenue of around $120 million or $0.32 per share is much higher than the $0.21 per share expected.

The growth was driven by sales growth in renewable energy, industrial machinery, broadcasting media, and semiconductors, each of which experienced mid-double-digit growth in the third quarter. It’s doing so well that the company announced a share repurchase program for 2021 that increased its market price even more.

However, just because it’s flourishing today doesn’t mean nothing but clear skies are ahead for Axcelis Technologies.

Will Axcelis Technologies Stock Short Circuit?

Axcelis could be experiencing temporary revenue growth from a strange economic climate that has caused a demand spike for devices as consumers stay indoors for longer.

Right now, capital is split between pandemic stocks and recovery stocks. When the market recovers, some believe more people will choose to eat at restaurants over cooking at home.

The push for Axcelis chips in solar applications has risks of government regulations and trade wars limiting the potential growth. This occurred with its communications equipment too.

As the U.S. China trade war escalated, it became clear certain manufacturers could only work in certain geographic regions. Axcelis is, at its core, an American company and could suffer for its national affiliation, just like Huawei, Apple (AAPL), and others do.

If government regulators around the world head down the path they are on, most technology companies will have a level of worry about market size contraction. And that includes both Axcelis and its competition.

Can Axcelis Technologies Competitors Win?

Because it works so deeply down the supply chain in a highly technical field, Axcelis has a comfortable barrier to entry. But it’s not without competition. Mattson Technology, ASM, KLA (KLAC), DISCO, and Mesnac Co are among the manufacturers with similar capabilities.

And many manufacturers like Apple (AAPL) and Microsoft (MSFT) are working to bring their chipmaking businesses in-house.

This changing of the guard, so to speak, could cause supplier contracts to change hands, and it’s not clear who will reap the benefits. However, Axcelis components have a broad enough range of applications so that it shouldn’t have issues maintaining liquidity over the next decade.

Is Axcelis Technologies Stock a Buy? The Bottom Line

Axcelis Technologies is a semiconductor component manufacturer that services a wide array of industries and applications. It has exposure in renewable energy, automotive, smart city, smartphones, industrial applications, and more.

The highly technical nature of its products gives the company a high barrier to entry. But that doesn’t mean big tech conglomerates aren’t bringing manufacturing in-house. This shift could shake up the industry, and Axcelis needs to ensures it services these new customers’ needs.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.