What happened
Shares of Aehr Test Systems (AEHR +0.42%) were shaking off market woes today and up 14.2% as of 12:30 p.m. ET. Notable was the fact that the Nasdaq Composite Index was tanking 3.9% on a bigger-than-expected jump in inflation this morning. Nevertheless, the chip fab equipment maker was shaking off that bad news for the market after Aehr said it just bagged an order with a new customer.
So what
Specifically, tiny Aehr Test Systems said the purchase order was from a new customer, "to be used for qualification of Aehr's wafer-level burn-in solution for silicon carbide devices for electric vehicles and other markets."
Notably, Aehr mentioned that this is a major supplier to the electric vehicle (EV) industry. Though financial terms weren't disclosed, investors are taking this to mean Aehr's rapid rise will continue.
Aehr stock has been hot, up nearly 60% in the last 12 months, although it is still down 46% from highs reached in late 2021. During its fiscal year 2022 (the 12 months ended in May 2022), revenue surged 206% higher to $50.8 million. Adjusted net income was $11.7 million, compared to an adjusted net loss of $3.2 million in fiscal 2021.
NASDAQ: AEHR
Key Data Points
Now what
The future is bright for this up-and-coming chip fab company. EV demand is rising, and with it, the number of chips needed per vehicle is set to grow exponentially.
The silicon going into a car is critical, though, as a failure could lead to incredibly expensive repairs -- or far worse. Aehr's test equipment helps ensure the electronics going into these EVs are up to the long, demanding road ahead of them.
Aehr often cites research from financial services company Canaccord Genuity that posits demand for silicon wafers used in EVs will go from 150,000 in 2021 to 6 million in 2030. Currently, Aehr is one of the few players with a scalable system that can help test all of those chip wafers. It's a unique position to be in and one that investors in the EV market might want to take note of.
Granted, after today's surge, shares of Aehr Test Systems trade for 37 times enterprise value-to-earnings before interest and tax (EBIT) -- or 324 times free cash flow, which is elevated, as free cash flow generated hasn't caught up with earnings yet. Basically, it's a premium price tag that assumes Aehr is able to deliver on its lofty growth expectations. But if it does, this could be a top chip industry growth stock in the making.
