What happened
Aehr Test Systems (AEHR 8.58%) stock jumped 26.7% in November, according to data from S&P Global Market Intelligence. For context, the S&P 500 and Nasdaq Composite indexes returned 5.6% and 4.5%, respectively, last month.
Aehr stock's robust November performance is primarily attributable to market dynamics. Investors snapped up beaten down stocks, particularly tech growth stocks, following the release of U.S. government statistics that showed inflation for October wasn't as high as economists had forecast.
Aehr manufactures semiconductor test and reliability qualification equipment. Its recent financial results have gotten a boost from higher demand for silicon carbide semiconductors for electric vehicles (EVs).
NASDAQ: AEHR
Key Data Points
So what
Aehr stock surged 18.6% in the two-day period following the Bureau of Labor Statistics' Nov. 10 release of Consumer Price Index (CPI) data for October. The stock continued its upward trajectory through the end of the month. For context, the S&P 500 and Nasdaq indexes rose 6.5% and 9.4%, respectively in the two days following the CPI release.
The October CPI increased 0.4% from the prior month and 7.7% over the last year. These numbers show that while inflation is still running hot, it's cooling down somewhat. In September, the CPI rose 8.2% from the same month a year ago. Moreover, the data was better than widely expected, as economists had been projecting the October CPI would increase 0.6% from the prior month and 7.9% for the one-year period.
The October CPI data fueled investors' hope that the Federal Reserve will soon begin to ease up on its aggressive monetary tightening policy. In 2022, the Fed has been quickly and substantially raising interest rates in an attempt to control inflation. High interest rates generally hurt stock prices because they raise financing costs for businesses and increase the relative attractiveness of fixed-income investments.
Now what
Investors interested in small-cap growth stocks might want to put Aehr Test Systems on their watch lists. (Small-cap stocks have market caps between $300 million and $2 billion; Aehr stock's market cap is about $735 million.) The company has been briskly growing revenue and it was profitable last quarter.
As I wrote in my October article on Aehr's fiscal first-quarter 2023 results:
For fiscal year 2023 (ending May 31), management reiterated its previously provided guidance for total revenue to be $60 million to $70 million, which would represent annual growth of 18% to 38%. Management also said that it expects a strong profit margin similar to last fiscal year. Last fiscal year, the company's adjusted profit margin (adjusted net income divided by revenue) was 23%.
