nLIGHT: It's A Very Tentative Buy

2025-03-09 00:31:08 ET

Summary

• nLIGHT, Inc. is pivoting towards aerospace and defense, which now accounts for 60% of its revenue, showing promising growth potential.
• Despite a 39% YoY decline in industrial laser sales, LASR's backlog orders increased by 55% YoY in 2024, indicating future revenue stability.
• LASR's vertically integrated operations and strong IP portfolio provide a competitive edge, especially in the growing defense sector with significant new contracts.
• Financial risks persist with declining industrial revenue and low margins, but strong cash reserves and no debt offer short-term stability.

nLIGHT, Inc. (LASR) is one of the biggest manufacturers of high-power semiconductor and fiber lasers globally, with over 300 customers in the industrial, microfabrication, aerospace, and defense industries . These days, the company is shifting most of its efforts towards the latter two, given that the demand in industrial is down so bad it’s tanked revenues for the third year straight. In fact, aerospace and defense now make up around 60% of its revenue, and company management says that they expect revenue from those industries to grow by another 25% in FY2025 . That’s positive, and I have reasons to be optimistic on some level: LASR increased its backlog orders by 55% YoY in 2024 (currently sitting at $167 million). It also has many long-term defense contracts relating to directed energy and laser sensing. So, there’s wiggle room moving forward....

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