I first began writing about Axcelis Technologies (ACLS 0.17%) in mid-2021, when its share price was just $41. The stock was flying under Wall Street's radar, but it was becoming an essential service provider to the fast-growing semiconductor industry and there was a clear opportunity emerging.
Axcelis stock has soared roughly 200% since then, and demand for advanced computer chips will only grow over time. In fact, some estimates suggest the sector could be worth a whopping $1.5 trillion per year by 2030. That means the world's leading producers will have to significantly expand manufacturing capacity, and Axcelis' portfolio of equipment and services will make that possible.
A handful of Wall Street analysts are now covering the company with a crystal-clear bullish consensus. Here's why investors should consider buying it hand over fist.
Axcelis appeared immune to the economic slowdown in 2022
Axcelis Technologies doesn't produce any chips itself; it instead supplies ion implantation equipment critical to the fabrication process. If a semiconductor manufacturer is expanding its production capacity, it requires more of this equipment; and Axcelis has a long list of global customers making processors, storage chips, and everything in between.
The semiconductor sector slowed in 2022 as supply finally caught up with the shortfalls caused by the pandemic during 2020 and 2021. As a result, many of the world's largest chipmakers suffered a decline in financial growth -- but not Axcelis. The company has a substantial backlog of orders because those chipmakers are looking to the future and continue to expand their capacity to meet long-term demand.
By the end of 2022, the dollar value of that backlog jumped to over $1.1 billion, up from $625 million at the start of the year.
The company was busy shipping orders around the world all year. It released countless announcements highlighting the acquisition of new customers in addition to follow-on equipment purchases by existing customers, especially around Asia, which is a major semiconductor production hub.
Axcelis delivered a record-breaking 2022
Whether it was revenue or earnings per share, the company's results came in at the highest levels since it was founded in 1978.
Axcelis' 2022 revenue came in at $920 million, up 39% compared to 2021 and well above the company's original guidance of $850 million. It also managed costs masterfully throughout the year, with an increase in operating expenses of just 19%.
That helped translate to a near doubling of the company's earnings per share (profit) year over year to $5.46. But 2022 was just another chapter in a powerful long-term growth story.
Axcelis isn't done yet, because CEO Mary Puma outlined a plan for the company to generate $1.3 billion in annual revenue within the next two to three years.
Axcelis stock is still a great value, and Wall Street is on board
Despite Axcelis stock tripling over the last 18 months, it's still relatively cheap on a price-to-earnings (P/E) basis.
Axcelis has a P/E ratio of 22.5 at the moment, which is a slight discount to the 23.6 P/E of the Nasdaq-100 technology index. Given Axcelis' earnings growth actually accelerated in 2022 compared to the prior year, it stands to reason that Axcelis stock should be trading at a premium to the market instead.
That might be why Wall Street is overwhelmingly bullish at the moment. Axcelis has a market capitalization of just $4 billion so it's still too small to capture the attention of the wider investment community, but The Wall Street Journal tracks five analysts who cover the stock, and every single one has given it the highest-possible buy rating.
The semiconductor industry is going to be at the center of innovation for the decade to come as technology continues to dominate everyday life. From electric vehicles to data centers to digital devices, it's hard to imagine a future where the chip sector isn't growing.
Axcelis Technologies will be in the middle of it all, and that's why it's not too late to buy the stock.
