What happened
Shares of ACM Research (ACMR +5.68%) climbed 53.8% in July, according to data from S&P Global Market Intelligence. While ACM didn't release its second-quarter earnings until after month-end, the stock got a hefty boost after a Chinese state-run newspaper, the China Securities Journal, ran a front-page editorial encouraging investors about the "wealth effect of the capital markets" and the prospect for a "healthy bull market."
Though ACMR is a U.S-founded and -listed company, a majority of its operations, employees, and customers are in China, and the editorial boosted all Chinese and China-related stocks.
Image source: Getty Images.
So what
While the editorial helped boost shares in July, ACMR is also posting strong growth and profitability numbers to justify the optimism, even without the added help. Founded in 1998, ACMR came out with its first semiconductor equipment technology in 2009, called the space alternated phase shift technology (SAPS) for single-wafer wet-cleaning tools. After having its IPO in 2017, ACMR has beaten analyst estimates every quarter, sending shares up 1,700% since then.
In July, the company continued to announce expansion initiatives, with the announcement that it had started construction on a new R&D manufacturing center in the Lingang Special Area of China (Shanghai) Pilot Free Trade Zone.
Now what
ACMR announced second-quarter earnings on Aug. 6, posting 35% revenue growth and raising full-year guidance from a range of $130 million-$150 million to a new range of $140 million-$155 million. The stock sold off a little bit after the earnings release, but it's still up a whopping 452% on the year!
ACMR Year to Date Price Returns (Daily) data by YCharts
ACMR looks like a rising star in the industry, but investors should take caution since the company has a very concentrated customer base, and these customers are mainly in China. China is pulling out all the stops to develop its own independent memory and semiconductor industry, which has rankled U.S. officials. As such, ACMR has the potential to get caught in the crosshairs of increased U.S.-China tensions.
Nevertheless, ACMR appears to be making more inroads into a global semiconductor industry with favorable growth prospects over the next decade. That means investors should keep an eye on this small but fast-growing company, while also being cognizant of the risks.
