Aehr Test Systems Stock Soars 18% as EV Market Demand Fuels Strong Guidance

Aehr Test Systems (AEHR 1.50%) stock surged 18.2% on Friday, following the semiconductor test and reliability qualification equipment supplier's Thursday afternoon release of its results for the fourth quarter of fiscal 2023, which ended May 31.

No doubt, investors liked that the quarter's adjusted earnings beat Wall Street's consensus estimate. However, it seems safe to assume that the primary reason for their enthusiasm was the powerful guidance for fiscal 2024 on both the top and bottom lines. The main driver of the robust outlook is growing demand for the company's equipment from manufacturers of silicon carbide semiconductors for use in electric vehicles (EVs). 

Aehr Test Systems' key quarterly numbers

Data source: Aehr Test Systems. GAAP = generally accepted accounting principles. Fiscal Q4 2023 ended May 31.

Investors should focus on the adjusted numbers, which exclude one-time items. 

Wall Street was looking for adjusted EPS of $0.21 on revenue of $22.3 million. So Aehr exceeded the earnings estimate and hit the top-line expectation on the bull's-eye.

The company ended the period with a backlog of $24.5 million. That backlog had zoomed up to $39.7 million as of the date of the earnings release. 

Aehr ended the quarter with cash and cash equivalents of $47.9 million, up 52% from a year ago. It has a light debt load.

Q4 business highlights 

• The company received its first purchase order from another new silicon carbide semiconductor company, bringing its total new silicon carbide customers to four in fiscal 2023.
• Importantly for fiscal 2024 and beyond, CEO Gayn Erickson said in his earnings release statement that each of these new carbide customers "is already ramping or plans to ramp our products into high-volume production using our multi wafer test and burn-in systems."

What the CEO had to say

CEO Erickson's statement in the earnings release was once again super-long. While I recommend investors read the statement in full, the following snippets include what I consider to be the main highlights:

We are pleased to report record financial performance for both the quarter as well as the entire fiscal year ended May 31. For fiscal 2023, total revenue grew 28% to a record $65.0 million, bookings reached a record of $78.3 million, and our GAAP profit of $14.6 million and non-GAAP profit of $17.3 million were also records, growing 54% and 62% year over year, respectively. 

We saw fiscal 2023 as a breakout year for our unique and proprietary wafer level test and burn-in products. These products provide complete solutions for semiconductor manufacturers for high-volume test, burn-in, and stabilization of semiconductors such as those used in electric vehicles, electric vehicle charging infrastructure, photovoltaic (solar) power conversion, and data and telecommunications infrastructure.

Robust fiscal 2024 guidance

For fiscal 2024, ending May 31, management guided for revenue of at least $100 million, representing annual growth of over 50%. It also expects GAAP net income of at least $28 million, representing annual growth of more than 90%.

A stock worth at least watching

Reiterating what I wrote last 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." Indeed, shares have nearly tripled since that time. 

While this small company's long-term growth potential looks quite promising, investors should keep in mind that its small size increases its risk level. As to its size, its fiscal 2023 revenue was just $65 million, while its stock has a market capitalization of less than $2 billion -- $1.4 billion, to be more exact -- making it a small-cap stock.