IPG Photonics Tripped Up By Some Familiar Themes

Advice like “wait for a pullback” or “buy the dip” is easy to write, but harder to follow. That’s particularly true for growth darlings like IPG Photonics (IPGP) that don’t so much pull back as tumble out of bed when they come up short on growth. And that’s where IPG Photonics sits today – down almost 40% from its 52-week high as the company guided to single-digit revenue growth for 2018; the first year in a long time that the company won’t produce double-digit growth.

Is it the end of IPG Photonics as a growth story? I don’t think so. The competition has continued to improve its own fiber laser offerings, and IPG is looking at weaker demand in some market segments, but the arguments for fiber lasers remain compelling and there are still opportunities for IPG to benefit from new market entry/conversion and ongoing upgrades to new technology. Chinese machine tool demand could be problematic in the short term, but if IPG can leverage mid-single-digit revenue growth into double-digit FCF growth, today’s price looks like an interesting opportunity.

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IPG Photonics Tripped Up By Some Familiar Themes