Shares of ACM Research (ACMR -4.42%) were gaining last month as the company known for making equipment that cleans semiconductor wafers posted solid results in its third-quarter earnings report and benefited from a broader rebound in the stock market and in chip stocks.
According to data from S&P Global Market Intelligence, the stock finished the month up 22%. As the chart below shows, the stock outperformed both the S&P 500 and a popular semiconductor exchange traded fund (ETF), though it benefited from the rising tide in both investments.
ACM Research shows promise
ACM stock actually fell in October when it reported preliminary earnings, but investors cheered the full earnings report, which came out on Nov. 7 as the stock climbed 18% over the next two days.
The company said revenue rose 26% to $168.6 million on a 31% increase in shipments to $213 million, which bodes well for future revenue growth as some of those deliveries represent initial tool systems awaiting customer acceptance, setting it up to bring in revenue from in-future quarters.
The revenue result was better than the company's preliminary guidance but worse than the analyst consensus at the time of its preliminary report at $173.7 million. Still, the better-than-projected result seemed to please investors. ACM also showed off strong and expanding margins with gross margin up 320 basis points to 52.5%, while adjusted earnings per share (EPS) improved from $0.42 to $0.57, which was well ahead of the consensus at $0.34. That gross margin was well above the company's long-term range of 40% to 45%, due to a favorable product mix and improved gross margin in specific product lines.
ACM also said it received a purchase order from a large U.S. manufacturer for its new Ultra C b backside clean and bevel etch tool, and launched its Ultra C v Vacuum cleaning tool, which was developed with several key customers. It said it received a purchase order for that product from a major Chinese manufacturer.
One analyst, Roth MKM, raised its price target from $15 to $20 on ACM and called the results "encouraging."
What's next for ACM Research
With the AI boom expected to drive demand for AI chips, ACM Research looks well positioned to benefit as it fills a unique niche as a picks-and-shovels play on increasing chip supply.
Even better, the stock looks well priced at a price-to-earnings ratio of 12.
