With Healthy End-Markets, Advanced Energy Industries Looks Too Cheap

The market teaches you to be paranoid - if something looks too cheap, it pays to investigate further to see what you might be missing. In the case of Advanced Energy Industries (AEIS), I can understand if investors are worried about the recovery trajectory of the industrial business and perhaps that the data center business could slow, but the core semiconductor business looks strong into 2021 and I think both data center and wireless will see good results in the coming quarters.

AEIS's exposure to semiconductor equipment manufacturers virtually guarantees cyclicality in the results, and data center and wireless spending has likewise been volatile (on an over sector basis) for some time. Plus there is the integration risk from the Artesyn deal - past attempts to venture outside of semiconductor equipment have not gone well for the company. Still, even factoring in those risks, I struggle to see why Advanced Energy Industries should be priced for low-to-mid teens long-term annualized returns and trading about halfway between its 52-week high and low when its major customers aren't nearly so weak.

 

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With Healthy End-Markets, Advanced Energy Industries Looks Too Cheap