Please ensure Javascript is enabled for purposes of website accessibility

Why This Small-Cap Semiconductor Stock Jumped 29% in August

By Neha Chamaria – Sep 6, 2021 at 12:50PM

Key Points

  • Demand for semiconductor chips is soaring even as the industry continues to grapple with a supply crunch.
  • Axcelis expects stronger sales growth this year than previously estimated.
  • Analysts are increasingly turning bullish on Axcelis and see strong upside in its stock price.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Axcelis has several tailwinds behind it, including robust demand from its largest customers.

What happened

After a dud July, semiconductor stock Axcelis Technologies (ACLS 0.39%) fired up in the month of August and gained 28.9%, according to data provided by S&P Global Market Intelligence.

Strong quarterly numbers amid the ongoing semiconductor chip shortage wasn't the only catalyst driving Axcelis shares.

So what

Axcelis shares had two spurts in August, one in the first week and the other in the last. It all started when the company released its earnings on Aug. 4.

Axcelis' revenue grew 10.9% and net income jumped 14.5% year over year in the second quarter. The most important number, though, was its system revenue which hit $140 million, exceeding $100 million for the first time since 2004. The company also generates some revenue from aftermarket services.

Semiconductor chips are critical material for electronics in computers, mobile devices, and automobiles. Axcelis manufactures ion implantation systems and other equipment used in the fabrication process in semiconductor manufacturing. In Q2, demand for Axcelis' flagship Purion systems remained strong.

"The rapid acceleration of the electrification of the automotive industry is creating substantial demand for power devices and image sensors, which is driving sustainable growth for the Purion product extensions specifically developed for these markets," said CEO Mary Puma during Axcelis' earnings release.

An electronic engineer working on integrated circuit boards.

Image source: Getty Images.

With Axcelis also upgrading its full-year revenue forecast to $625 million versus its earlier projection of $550 million, several analysts jumped in with bullish views and higher price targets on Axcelis shares soon after earnings.

  • Stifel raised its price target to $52 a share.
  • Craig-Hallum upped its price target to $54 a share.
  • Riley increased its price target to $65 per share.

Meanwhile, good news continued to pour in from the industry, particularly from Axcelis' key customers. Semiconductor Manufacturing International Corporation's (SMIC) revenue for the quarter ended June jumped 43% year over year on robust demand for semiconductors.

On Aug. 24, Korean giant Samsung Group announced plans to invest nearly $206  billion over the next three years, primarily in semiconductors through its crown jewel, Samsung Electronics.

SMIC and Samsung Electronics were the two largest customers for Axcelis in 2020, each accounting for at least 10% of revenue.

Now what

With demand for semiconductor chips skyrocketing, global chip production and shipments are hitting all-time highs. Global semiconductor sales surged 29% year over year in July, as per latest data from the Semiconductor Industry Association. With SMIC also upgrading its full-year revenue growth forecast to 30%, investor interest in Axcelis shares will likely remain high.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Axcelis Technologies Stock Quote
Axcelis Technologies
$79.38 (0.39%) $0.31

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.