Monday, November 19, 2018

Atlas Copco Hits An Air Pocket On Weaker Vacuum Results

I was worried about the possibility of weaker semiconductor orders and slowing industrial activity when I last wrote about Atlas Copco (OTCPK:ATLKY) in July, and those worries are looming even larger now. There’s no longer any real debate about weakness in the semiconductor equipment space; the argument is now about how bad it will get and how long it will last. Likewise, I think it’s becoming increasingly apparent that there are more than a few industrial end-markets that are seeing meaningful decelerations.

None of this is good news for Atlas Copco in the short-term, and there are risks of further negative revisions into 2019 if the semiconductor down-cycle turns uglier and if industrial end-markets slow further. Counterbalancing that is the reality that Atlas Copco is one of the best companies out there, and a company that I believe can do well by shareholders over the long term. The shares are still above my revised DCF-based fair value, and I don’t dismiss the risk of industrial stocks derating further, but this looks like a pretty classic watchlist opportunity to me.

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Atlas Copco Hits An Air Pocket On Weaker Vacuum Results

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