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Why Kulicke & Soffa Industries Stock Rose 15.8% in April

By Billy Duberstein - May 8, 2021 at 9:45AM

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The semiconductor shortage is leading to boom times for equipment suppliers.

What happened

Shares of semiconductor back-end equipment supplier Kulicke & Soffa Industries (KLIC -1.31%) rose 15.8% in April, according to data provided by S&P Global Market Intelligence. Although Kulicke and Soffa just reported earnings on May 5, it previewed better-than-expected earnings back on April 19, owing to the incredibly strong demand for semiconductors and LED screens across a wide range of industries.

Closeup of chips on a printed circuit board.

Image source: Getty Images.

So what

In April, Kulicke upped its guidance for the quarter ending in April to $340 million in revenue and $1.20 in adjusted earnings per share. That's significantly higher than the original guidance of $300 million in revenue and $0.88 in adjusted EPS.

Results wound up coming in at $342 million and $1.26, owing to incredibly strong demand. And management expects the good times to continue, guiding for $400 million in revenue and $1.35 in adjusted EPS next quarter.

Now what

Surprisingly, Kulicke and Soffa's stock sold off even after these results, although it bounced back on Friday. Some investors may think this traditionally cyclical company is peaking after its strong April run. However, as noted on the conference call with analysts, CEO Fusen Chen sees increasingly complex systems-on-chips expanding the market for back-end equipment. Meanwhile, the mini-LED market, which could replace some of the OLED and LCD screen markets, is a new potential leg of growth for K&S.

Kulicke and Soffa is on track to earn well over $4 per share this year, and also has about $9 per share of cash on the balance sheet. At $50 per share, the stock still looks attractive here.

Billy Duberstein owns shares of Kulicke & Soffa Industries and has the following options: short May 2021 $45 puts on Kulicke & Soffa Industries and short May 2021 $50 puts on Kulicke & Soffa Industries. His clients may own shares of the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Kulicke and Soffa Industries, Inc. Stock Quote
Kulicke and Soffa Industries, Inc.
$47.48 (-1.31%) $0.63

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