China Takes Another Bite Out Of IPG Photonics

When your prime market, the market where you generate close to 50% of your revenue, is in trouble, it’s tough to work around that. Such is the situation for IPG Photonics (IPGP), and this once high-flying leader in fiber lasers has gotten pummeled over the last three months on revenue and earnings weakness due to China. The latest blow came on Friday, with the company announcing that third quarter revenue and EPS were going to come in about 5% or so short of where expectations were a week ago.

IPG’s China-related risks showed up in the second quarter, and clearly they are continuing to linger, putting near-term revenue and margins very much in doubt. What’s more, it’s at least plausible to me that this period of trade squabbling between the U.S. and China is going to give a boost to Chinese fiber laser companies like Han’s Laser and Wuhan Raycus and improve their profile with Chinese manufacturing customers. Although IPG shares do look undervalued, and the multiples are lower than they’ve been in quite some time, anybody considering the shares today needs to be prepared to withstand further near-term losses until the situation bottoms out.

Read the full article here:
China Takes Another Bite Out Of IPG Photonics