Aehr Test Systems (AEHR 1.50%) stock soared 32.1% on Friday, powered by the semiconductor test and reliability qualification equipment supplier's prior-afternoon release of a better-than-expected report for its second quarter of fiscal 2023.
Both revenue and earnings easily beat Wall Street's consensus estimates, and management reiterated its full-year guidance.
Investors are enthused -- and rightly so, in my view -- about Aehr's potential to get a long-term tailwind from the electric vehicle (EV) revolution. The company is experiencing growing demand for its equipment from manufacturers of silicon carbide semiconductors, which are increasingly being used in EVs.
Image source: Getty Images.
Aehr Test Systems' key numbers
| Metric | Fiscal Q2 2022 | Fiscal Q2 2023 | Change |
|---|---|---|---|
| Revenue | $9.6 million | $14.8 million | 54% |
| GAAP net income | $717,000 | $3.7 million | 416% |
| Adjusted net income | $1.4 million | $4.5 million | 221% |
| GAAP earnings per share (EPS) | $0.03 | $0.13 | 333% |
| Adjusted EPS | $0.05 | $0.16 | 220% |
Data source: Aehr Test Systems. GAAP = generally accepted accounting principles. Fiscal Q2 2023 ended Nov. 30, 2022.
Investors should focus on the adjusted numbers, which exclude one-time items.
Wall Street was looking for adjusted EPS of $0.08 on revenue of $12.8 million. So Aehr flew by both expectations.
The company's bookings were $10.8 million for the quarter. It ended the period with a backlog of $15.5 million. That backlog had climbed to $23.5 million as of the date of the earnings release.
Aehr ended the quarter with cash and cash equivalents of $36.6 million. It has a light debt load.
What the CEO had to say
CEO Gayn Erickson's statement in the earnings release was once again super-long. While it's worth reading in full, the following snippets include what I consider to be the main takeaways for investors:
We had a very solid quarter, reflecting strong sequential and year-over-year growth in revenue and net income, both ahead of consensus estimates. Our momentum in silicon carbide wafer level burn-in continues to grow. We see this momentum continuing for the next several years as companies are adding significant capacity in silicon carbide semiconductors to address the incredible forecasted demand, particularly for the electric vehicle and electric vehicle charger markets. [...]
We are very optimistic for a strong second half of this fiscal year and believe the momentum will continue into our fiscal 2024.
Full-year guidance reiterated
For fiscal-year 2023 (ending May 31), management reiterated its expectation that revenue will 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 was 23%.
Growth investors: Put this stock on your watch list
Reiterating what I wrote in October following the company's release of its fiscal Q1 results, "Aehr Test Systems stock is worth a spot on growth investors' watch lists. Unlike many companies involved in the EV supply chain, Aehr is profitable."
That said, Aehr is small and in the very early stages of gaining traction in the EV market, so its stock is only a fit for investors comfortable with higher risk and volatility.
