Trends come and go, but the recent frenzy to take Wall Street by storm is proving to be quite persistent. AI hype has been all the rage this year, and stocks with exposure to generative AI and masters (Large Language Models) have reaped the benefits.
So much so that the best Wall Street analysts think it’s time to change the tune on many of them. SemiCap Space Survey, Needham Analyst Quinn Bolton He faces a slew of highly rated names with little room to run from here.
“With SemiCap stock rising significantly on AI noise but with AI unlikely to lead to a significant increase in WFE spending, we believe many SemiCap stocks are overbought in the near term,” said the five-star analyst. “In our view, investors will need to look to 2025, 2026 and the next WFE cycle to determine if there is enough earnings strength in the bull run to justify buying stocks at current levels.”
Given the above, Bolton downgraded several SemiCap stocks. However, not all SemiCap shares are priced to perfection. Bolton, which boasts a 72% success rate on its stock recommendations and an average return of 39%, currently ranks Top Analysts in Street, so it’s fair to say that he has a feel for this game. He believes two SemiCap stocks, in particular, are still up for picking. Let’s take a closer look.
ACM Research (ACMR)
The first stock we’ll look at is ACM Research, a leader in the advanced technology and manufacturing tools the chip industry requires in producing silicon wafers. This is a level deeper than the basic industry, and ACM Research has lines of tools for wet processing, electrochemical coating, stress-free polishing, and other biochip manufacturing processes. Simply put, the companies that make the chips that power the AI systems couldn’t even get started without ACM tools.
In addition to high-tech tools, ACM Research also provides solid customer support, which is maintained throughout the life of the company’s equipment products. ACM Research will help its customers install their hardware, then work with them to improve systems, thwart issues, and avoid bottlenecks in chip production. The company’s support activities include software, applications, parts and service, regardless of where the customer is located.
Demand for silicon semiconductor wafers has been beneficial to ACM Research, which is clearly seen in the company’s latest quarterly report for Q1 2013. On the top line, ACMR showed revenue of $74.26 million, posting a 76% year-over-year increase and exceeding expectations by more than From $5.5 million. The company’s earnings, at 15 cents per share by GAAP, came in at 16 cents per share, ahead of expectations. The company also complied with its revenue guide for fiscal 2023, calling sales between $515 million and $585 million. The consensus estimate was $540.58 million.
Quinn Bolton loves this company’s balance sheet, as he noted in his recent stock review. He wrote his stance on ACMR: “With SemiCap being the fastest-growing stock in our coverage with about $400 million in cash and very little debt, we think a 12.5x multiple is more than fair. The stock is not currently receiving much interest from investors because of its significant exposure to China. ACMR sentiment will change over time as its growth proves very difficult to ignore.”
Looking ahead, Bolton goes on to rate the ACMR as Buy, with a price target of $18 suggesting a 1-year upside potential of 59%.
Like Bolton, other analysts are also taking a bullish approach. The ACMR Strong Buy consensus rating is divided into 5 Buys and zero Holds or Sells. Given an average price target of $21.30, the potential upside sits at 86%. (be seen ACMR stock forecast)
Coho, Inc. (from)
Our second Bolton pick is Cohu, a leading producer of test and inspection equipment used on chip manufacturing lines. Products offered by Cohu play a vital role in ensuring strict quality control throughout the chip manufacturing process.
Cohu has established itself as a major player in the chip testing field, with a broad range of test equipment and services designed to meet the needs of back-end semiconductor manufacturers. The company describes itself as a “one-stop-shop” for a broad range of testing solutions, including handling equipment, thermal subsystems, vision inspection and gauges.
However, the company isn’t stopping with chip makers. Cohu has strengthened its presence in the high-tech testing space by expanding its offering, with testing and quality control equipment for IoT, industrial and medical, mobility, automotive, computing and networking, and consumer product applications. The company has come a long way since its founding in 1947.
However, Cohu’s latest Q1 2013 financial release showed some mixed results. The company’s revenue decreased 9.3% year-over-year, to $179.37 million, and beat expectations by $0.92 million. However, Cohu’s non-GAAP gross margin increased from 46.1% in Q1 ’22 to 48.2% in Q1 ’23. This helped the bottom line performance, $0.56 EPS beat expectations by $0.02.
Positive metrics caught Bolton’s attention, and he wrote of the stock: “Cohu’s NG GM is showing resilience even at a lower revenue level, and we continue to believe that strong GM will help support shares near current levels. Strong recurring revenue, manufacturing expansion in the Philippines, And increasing processor margins, the mix will enable a strong GM. The higher costs had a 29 basis point impact on GM and will continue through 2023.”
“Remarkably,” the senior analyst added, “COHU has received a $5mm multi-unit SiC order for testing and inspection automation. COHU believes that SiC will account for approximately 2.5% of sales in 2023. However, we believe that the near- and long-term opportunity for COHU is in SiC is currently underappreciated. We expect COHU carbon carbide yields to grow faster than the top line in the coming years.”
Taking this optimistic stance forward, Bolton gives COHU stock a Buy rating and sets a price target of $52, indicating confidence in an upside of 29% in the one-year time horizon.
Overall, the Wall Street consensus for COHU is a Strong Buy, based on 4 analyst ratings including 3 Buys and 1 Hold. Shares are selling for $40.12, and the average price target of $42.75 means a one-year upside of 6.5% per share. (be seen COHU stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
