Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside |
|---|---|---|---|---|---|---|---|
| 6 Jun, 24 | ACMR | Buy | USD 22.96 | USD 24.2 | USD 26.7 | 7 days | 16.3% |
Data Powered by EOD Historical Data (“EODHD”).
ACM Research, Inc., together with its subsidiaries, develops, manufactures, and sells single-wafer wet cleaning equipment for enhancing the manufacturing process and yield for integrated chips worldwide. It offers space alternated phase shift technology for flat and patterned wafer surfaces, which employs alternating phases of megasonic waves to deliver megasonic energy in a uniform manner on a microscopic level; timely energized bubble oscillation technology for patterned wafer surfaces at advanced process nodes, which provides cleaning for 2D and 3D patterned wafers; Tahoe technology for delivering cleaning performance using less sulfuric acid and hydrogen peroxide; and electro-chemical plating technology for advanced metal plating. The company markets and sells its products under the SAPS, TEBO, ULTRA C, ULTRA Fn, Ultra ECP, Ultra ECP map, and Ultra ECP ap trademarks through direct sales force and third-party representatives. ACM Research, Inc. was incorporated in 1998 and is headquartered in Fremont, California.
Lower Balance Sheet risk: Debt/Equity ratio of 0.14x in Q1FY24 vs. 0.19x in Q1FY23
Higher Net Profitability: Net margin of 14.5% in Q1FY24 vs. industry median of 8.6%
Decreased Returns to shareholders: ROE of 2.2% in Q1FY24 vs. 2.4% in Q4FY23
Lower short-term liquidity: Current ratio of 2.31x in Q1FY24 vs. industry median of 3.45x
Cyclical nature of the semiconductor industry, intellectual property risks, supply chain disruptions, etc.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 22.96 | 19.5 | 24.2 | 26.7 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Impressive Surge in Shipments: Total shipments in the first quarter of 2024 reached USD 245 million, marking a remarkable increase of 175% compared to the same period in 2023. This substantial growth includes both deliveries that contributed to the quarter's revenue and initial deliveries of first tool systems, which are pending customer acceptance and may generate revenue in future quarters.
Innovation in Advanced Packaging: ACM has significantly expanded its advanced packaging portfolio with the introduction of the Frame Wafer Cleaning Tool, designed for efficient semiconductor wafer cleaning during the post-debonding process. This tool features an innovative solvent reclamation system that offers environmental and cost benefits. The first installation and qualification of this tool have been successfully completed with a major Chinese manufacturer, highlighting ACM's commitment to technological advancements.
Robust Revenue and Gross Margin Performance: Revenue for the first quarter of 2024 stood at USD 152.2 million, reflecting a 105.0% increase compared to the previous year, driven by higher sales across various segments including single wafer cleaning and advanced packaging. The gross margin for the quarter was 52.0%, slightly down from 53.8% in the prior year. However, the non-GAAP gross margin, excluding stock-based compensation, was 52.5%, still exceeding ACM's long-term business model range of 40% to 45%.
Strong Operating and Net Income Growth: Operating income for the first quarter was USD 25.2 million, a significant rise from USD 8.9 million in the prior year, with an operating margin of 16.6%. Excluding stock-based compensation, non-GAAP operating income was USD 39.8 million, showing a notable increase from USD 10.9 million. Net income attributable to ACM Research, Inc. was USD 17.4 million, up from USD 7.1 million, while non-GAAP net income, excluding stock-based compensation and unrealized losses on short-term investments, surged to USD 34.6 million from USD 9.9 million. Despite a slight decrease, cash and cash equivalents totaled USD 288.3 million as of March 31, 2024, compared to USD 304.5 million at the end of the previous year.
Considering the recent business and financial updates, increase in net sales, attractive valuation, mentioned key risk, optimistic outlook, lower debt profile, and current trading levels, a 'Buy' recommendation has been given on the stock at the closing market price of USD 22.96, as of June 05, 2024.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Technology Industry: Semiconductor Equipment & Materials
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| ACMR Acm Research Inc |
0.24 1.62% | 15.40 | 12.05 | 8.32 | 1.38 | 1.05 | 1.01 | 4.77 |
| ASML ASML Holding NV ADR |
-3.43 0.48% | 716.06 | 49.01 | 44.05 | 13.98 | 26.27 | 13.85 | 38.25 |
| ASMLF ASML Holding NV |
-2.94 0.41% | 714.48 | 35.84 | 34.36 | 10.90 | 22.09 | 10.98 | 30.93 |
| AMAT Applied Materials Inc |
-2.65 1.60% | 162.80 | 19.53 | 17.73 | 5.16 | 7.46 | 5.10 | 15.75 |
| LRCX Lam Research Corp |
-3.63 4.83% | 71.57 | 35.59 | 26.25 | 8.76 | 15.26 | 8.72 | 27.97 |
Data Powered by EOD Historical Data (“EODHD”).
Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is June 05, 2024. The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.
Note 4: The report publishing date is as per the Pacific Time Zone.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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