2024-04-11 03:36:35 ET
Summary
- Advanced Energy Industries is likely at or near its cyclical trough, as the company sees trailing-edge destocking and weaker industrial end-markets.
- Semiconductor demand should improve from here and accelerate in 2025/2026 on new fabs, as well as increased deposition/etch intensity for new processes.
- Industrial and telecom markets look soft today, but AEIS has longer-term leverage to automation, data centers, and electrification, as well as growth in powered medical equipment.
- Gross margin improvement is a key must-have for the shares to perform well in the next up-cycle.
- AEIS stock does not look particularly cheap on near-term performance metrics, but that's not unusual during troughs and there's a case for better returns as troughing markets return to growth in 2025+.
Writing about Advanced Energy Industries (AEIS) in late September, I was concerned about the near-term outlook for semiconductor manufacturing equipment demand as well as key industrial end-markets like manufacturing and automation. Those concerns have definitely played out, as AEIS saw meaningfully weaker demand in the fourth quarter of 2023 and guided substantially below expectations for the first quarter of this year....
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For further details see:
Advanced Energy Industries: Likely Troughing, But Upside Demands Clarity On The Revenue And Margin Rebound Path