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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.

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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.

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Axcelis Technologies Stock Quote
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ACLS
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