Within the 37-year historical past of the Nasdaq-100 index, it has solely posted a loss in consecutive years on one event: in the course of the dot-com tech crash from 2000 to 2002. Due to this fact, when the index plunged 33% final 12 months, a rebound in 2023 was the probably consequence.
True to historical past, the Nasdaq-100 has completely ripped greater with a 52% achieve this 12 months. Macroeconomic headwinds, like inflation and rate of interest pressures, eased, which was useful. However traders can be happy to know that additionally bodes very nicely for 2024. See, bounce-back years like 2023 have all the time been adopted by one other constructive 12 months, which tends to provide a return of 21.5% (on common).
With that in thoughts, semiconductor inventory Axcelis Applied sciences (NASDAQ: ACLS) might be a incredible purchase if the market continues to maneuver greater. The corporate is rising its income and earnings at a brisk tempo, and its inventory trades at a discount valuation proper now. Here is what traders have to know.
Axcelis is carrying an enormous order backlog into 2024
Axcelis is not a chip producer, nevertheless it sells its ion implantation gear to main chip makers, forming a crucial a part of the fabrication course of. Due to this fact, the corporate remains to be uncovered to rising demand throughout the trade for chips in classes like electrical automobiles and artificial intelligence (AI).
In truth, Axcelis has skilled robust demand this 12 months from producers of silicon-carbide energy gadgets within the electrical automobile trade. Energy gadgets course of and ship electrical energy in workloads requiring excessive currents, and silicon carbide results in extra environment friendly outcomes than conventional silicon-based {hardware}. In electrical automobiles, that interprets to quicker charging instances and extra mileage per cost.
AI is not a significant income driver for Axcelis in the meanwhile, however in its third-quarter convention name with traders, administration highlighted the know-how’s requirement for rising quantities of reminiscence (DRAM) and storage (NAND) capability. In consequence, the corporate is anticipating AI to develop into a supply of robust demand.
However, the corporate has its arms full with its current end-markets. It at the moment has an order backlog value $1.2 billion, practically a document excessive, and it’ll carry the vast majority of it into the brand new 12 months. For context, it is equal to greater than 12 months’ value of income.
Income is on monitor to set a document this 12 months
Axcelis generated $820.3 million in income by the primary three quarters of 2023 (ended Sept. 30), representing a year-over-year improve of 25.4%. The corporate is on monitor to ship a record-high $1.1 billion in income for the complete 12 months.
The corporate’s outcomes are much more spectacular contemplating many chipmakers have just lately suffered a slowdown in income development — some, like Superior Micro Gadgets, even noticed revenues shrink. Markets reminiscent of private computing and gaming have suffered from a drop in client spending however ought to enhance subsequent 12 months, given inflation and rates of interest have declined from their peaks.
However Axcelis is considerably insulated from a few of these short-term struggles as a result of its clients usually plan their capital expenditures years upfront. In the event that they intend to have a better chip manufacturing capability sooner or later, they could place gear orders as we speak in preparation (therefore Axcelis’ deep order backlog). That is why Axcelis inventory has the potential to be a dependable long-term performer.
Axcelis inventory seems like a complete discount going into 2024
Axcelis is extremely worthwhile, and it is on monitor to ship $7.27 in earnings per share for the 12 months. Based mostly on its present inventory worth close to $136, it trades at a price-to-earnings (P/E) ratio of roughly 19.
That is a 32% low cost to the Nasdaq-100 index, which trades at a P/E ratio of 28. The index is dwelling to distinguished chip firms like Nvidia, Superior Micro Gadgets, and Texas Devices (amongst others).
Regardless of Axcelis not producing chips, administration’s commentary suggests it’s going to profit from the AI tailwind going ahead. The corporate additionally has a really robust 12 months forward due to its order backlog. Electrical automobile demand can even probably stay robust in 2024 because the trade continues to scale up.
Based mostly on these elements, mixed with Axcelis’ means to develop its prime and backside strains in robust financial situations, its inventory deserves somewhat extra credit score on the valuation entrance. I feel it’s going to probably get it within the new 12 months.
Do you have to make investments $1,000 in Axcelis Applied sciences proper now?
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Anthony Di Pizio has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Superior Micro Gadgets, Nvidia, and Texas Devices. The Motley Idiot has a disclosure policy.
History Suggests the Nasdaq Could Soar in 2024, and Here’s the Stock to Buy If It Does was initially revealed by The Motley Idiot
