The semiconductor industry is a tough place to play, but the
semiconductor equipment industry is even worse, as the cycles swing even
higher and lower, and as the timing of orders is difficult to predict
(and can have huge impacts on the stocks in the meantime). What's more,
you're talking about an industry where the key customers are keenly
focused on trying to improve their own free cash flow, leading to a "do
more with less" philosophy with equipment than can pressure suppliers.
What's
the best defense? A good offense, or in this case, compelling
technology and products that offer end users real advantages in
throughput, production costs, and/or total cost of lifetime ownership. Rudolph Technologies (NYSE:RTEC)
is trying to bring new technology to areas like advanced packaging,
inspection, and metrology and use it to leverage real growth in new
packaging technologies and RF and MEMS production.
While I'm an owner of Ultratech (NASDAQ:UTEK),
a Rudolph competitor, I do think Rudolph's valuation is interesting.
Product acceptance/adoption, order timelines, underlying demand for
chips, and competition are all real issues (and difficult to forecast in
their own right), but I believe mid-single digit revenue growth over
the long term and peak margins in the mid-to-high 20%'s can justify a
fair value in the mid-to-high teens today, with upside into the $20s if
things go well.
Read more here:
Rudolph Technologies Riding Powerful New Chip Trends
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