Shares of Axcelis Technologies (ACLS 0.95%) rose a whopping 20.6% in December, according to data from S&P Global Market Intelligence. Axcelis is a semiconductor equipment stock focused primarily on ion-implantation equipment -- a key step in the production cycle for advanced- and mature-node chips.
There wasn't any specific news propelling Axcelis higher last month, but the company did hold its investor day on Dec. 9, providing a solid business model that showed a path to $1 billion in revenue -- significantly higher than today. In addition, lower-valued semiconductor stocks fared much better than their higher-priced software peers, as the current shortage shows few signs of easing anytime soon and interest rates seem poised to rise.
In its investor day presentation, Axcelis put forward guidance for its business somewhere between $850 million and $1 billion in revenue over the next few years, up from an estimated $640 million in 2021. Management also sees operating margin rising into the mid-20s, up from an estimated 18.5% this year.
That long-term guidance likely quelled fears that we may be nearing the top of the current semiconductor boom, which has spurred two straight years of strong growth and looks to be heading for a third.
With such strong growth and many semiconductor companies still pre-booking sales through 2022, some market analysts have theorized we may be past the boom-bust era in semiconductors. While it's probably dangerous to say "it's different this time," the sheer scale of current semi demand, along with national security concerns, could fuel semiconductor production investment for another few years. And the diversity of devices requiring more and more chips should at least diminish the amplitude of the ups and downs in the industry, even if it doesn't eliminate them entirely.
After its strong run, Axcelis only trades at 18.7 times 2022 earnings estimates. That makes it somewhat fully priced if the sector is still cyclical, but perhaps cheap if semiconductors become a steadier growth industry. After all, that's still a lower P/E ratio than the overall market.
While I like some of its peers better, Axcelis could make a strong addition to a portfolio of semiconductor equipment companies. Despite its strong recent run, it's an attractive sector for any investor who believes this semiconductor growth cycle could last multiple years, and not just this year.