Within the 37-year historical past of the Nasdaq-100 index, it has solely posted a loss in consecutive years on one event: through the dot-com tech crash from 2000 to 2002. Due to this fact, when the index plunged 33% final 12 months, a rebound in 2023 was the probably consequence.
True to historical past, the Nasdaq-100 has completely ripped larger with a 52% achieve this 12 months. Macroeconomic headwinds, like inflation and rate of interest pressures, eased, which was useful. However traders might be happy to know that additionally bodes very nicely for 2024. See, bounce-back years like 2023 have all the time been adopted by one other optimistic 12 months, which tends to supply a return of 21.5% (on common).
With that in thoughts, semiconductor inventory Axcelis Applied sciences (NASDAQ: ACLS) could possibly be a incredible purchase if the market continues to maneuver larger. The corporate is rising its income and earnings at a brisk tempo, and its inventory trades at a cut price valuation proper now. Here is what traders must know.
Axcelis is carrying an enormous order backlog into 2024
Axcelis is not a chip producer, nevertheless it sells its ion implantation tools to main chip makers, forming a vital a part of the fabrication course of. Due to this fact, the corporate remains to be uncovered to rising demand throughout the trade for chips in classes like electrical autos and synthetic intelligence (AI).
The truth is, Axcelis has skilled sturdy demand this 12 months from producers of silicon-carbide energy units within the electrical car trade. Energy units course of and ship electrical energy in workloads requiring excessive currents, and silicon carbide results in extra environment friendly outcomes than conventional silicon-based {hardware}. In electrical autos, that interprets to sooner charging instances and extra mileage per cost.
AI is not a significant income driver for Axcelis for the time being, however in its third-quarter convention name with traders, administration highlighted the know-how’s requirement for growing quantities of reminiscence (DRAM) and storage (NAND) capability. Consequently, the corporate is anticipating AI to grow to be a supply of sturdy demand.
Nonetheless, the corporate has its palms full with its present end-markets. It at present has an order backlog value $1.2 billion, almost a report excessive, and it’ll carry nearly all of it into the brand new 12 months. For context, it is equal to greater than 12 months’ value of income.
Income is on observe to set a report this 12 months
Axcelis generated $820.3 million in income by means of the primary three quarters of 2023 (ended Sept. 30), representing a year-over-year enhance of 25.4%. The corporate is on observe to ship a record-high $1.1 billion in income for the complete 12 months.
The corporate’s outcomes are much more spectacular contemplating many chipmakers have not too long ago suffered a slowdown in income development — some, like Superior Micro Units, even noticed revenues shrink. Markets equivalent to private computing and gaming have suffered from a drop in client spending however ought to enhance subsequent 12 months, given inflation and rates of interest have declined from their peaks.
However Axcelis is considerably insulated from a few of these short-term struggles as a result of its prospects sometimes plan their capital expenditures years prematurely. In the event that they intend to have a better chip manufacturing capability sooner or later, they could place tools orders immediately in preparation (therefore Axcelis’ deep order backlog). That is why Axcelis inventory has the potential to be a dependable long-term performer.
Axcelis inventory appears to be like like a complete cut price going into 2024
Axcelis is extremely worthwhile, and it is on observe to ship $7.27 in earnings per share for the 12 months. Primarily based on its present inventory value close to $136, it trades at a price-to-earnings (P/E) ratio of roughly 19.
That is a 32% low cost to the Nasdaq-100 index, which trades at a P/E ratio of 28. The index is house to outstanding chip corporations like Nvidia, Superior Micro Units, and Texas Devices (amongst others).
Regardless of Axcelis not producing chips, administration’s commentary suggests it is going to profit from the AI tailwind going ahead. The corporate additionally has a really sturdy 12 months forward because of its order backlog. Electrical car demand can even probably stay sturdy in 2024 because the trade continues to scale up.
Primarily based on these components, mixed with Axcelis’ means to develop its prime and backside traces in powerful financial situations, its inventory deserves somewhat extra credit score on the valuation entrance. I feel it is going to probably get it within the new 12 months.
Must you make investments $1,000 in Axcelis Applied sciences proper now?
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Anthony Di Pizio has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Superior Micro Units, Nvidia, and Texas Devices. The Motley Idiot has a disclosure coverage.
Historical past Suggests the Nasdaq Might Soar in 2024, and Here is the Inventory to Purchase If It Does was initially revealed by The Motley Idiot