Advanced Energy Industries Takes A Hit As The Semiconductor Cycle Is Still Sorting Itself Out

I believe Advanced Energy Industries (AEIS) highlights at least some of the risks I've seen in the rally in semiconductor and semiconductor equipment names. Even though the year-to-date performance is still strong (up about 18% as of this writing), the shares have come down about 15% off a recent peak on a combination of weaker first quarter results and guidance, as the market isn't seeing the quick, sharp recovery that investors want to believe is going to happen.

Another weak quarter (or two) remains in play as a risk factor, but I think these shares hold some appeal for more risk-tolerant investors. I don't see any real sign that AEIS is losing traction with its two largest customers (Applied Materials (AMAT) and Lam Research (LRCX)), and I think the long-term outlook and realities of the semiconductor market mean good long-term demand for chip-making equipment and AEIS's components.

Follow this link for more:
Advanced Energy Industries Takes A Hit As The Semiconductor Cycle Is Still Sorting Itself Out

As The Market Gets More Fearful About VAT Group, It's Tempting To Get Greedy

”Be fearful when others are greedy, and greedy when others are fearful.” - Warren Buffett

The Street’s unbridled love affair with semi-equipment stocks looks to be over, with investors increasingly worried about the prospect for equipment order push-outs and a general slowdown later in 2018 and into 2019, and perhaps an actual short-term contraction. That’s not great news for Switzerland’s VAT Group (OTCPK:VACNY) (VACN.S), as this leading provider of vacuum valves depends upon a strong semiconductor and display equipment order environment for its own growth.

I do believe there is sufficient evidence to support the idea that 2019 will be a much more challenging year, and there’s really not much visibility at this point. That’s a dangerous set-up, and buying equipment stocks going into a slowdown is often a painful (or at least frustrating) experience. But then, VAT is a significantly above-average equipment provider, and getting too cute about waiting for the ideal entry point could mean never owning the shares.

Investors should note that VAT Group’s ADRs are not very liquid; the local shares are considerably more liquid, but that may not be an option for all investors.

Read more here:
As The Market Gets More Fearful About VAT Group, It's Tempting To Get Greedy

Advanced Energy Industries Closer To The Edge

Everybody has probably seen at least one video of a person (usually a male between the ages of 15 and 40) running full-speed at some sort of barrier that the runner assumes is lightweight and/or will be easily passed through… only to discover too late (typically upon regaining consciousness) that it was actually quite solid.

I mention that as an opening to the dilemma facing Advanced Energy Industries (AEIS) investors right now. Based upon what major customers like Applied Materials (AMAT) and Lam Research (LRCX) are saying, it looks pretty likely that semiconductor equipment demand growth will slow noticeably in 2019 - but is this a "lightweight" barrier that is just a dip in a long-term growth trajectory driven by new architectures and strong demand for IoT and memory or is the industry looking at a hard stop and a return to the "normal" cyclicality of past eras?

I'm cautiously optimistic that it is more the former than the latter, and it doesn't take hefty growth assumptions to drive a worthwhile fair value here. I advised caution on AEIS back in mid-February and the shares are down slightly since then (peers like MKS Instruments (MKSI) and Comet (OTC:CHLDF) (COTN.S) have done similar-to-worse, while XP Power (OTCPK:XPPLF) (XPP.L) has done better). I think this is still a risky call - buying tech into a slowing growth cycle is tough way to make money - but it's hard to ignore a well-run company with growing end-markets (on a long-term basis) and an interesting valuation.

Click here to continue:
Advanced Energy Industries Closer To The Edge

Axcelis Following A Different Plan As Semiconductor Tool Spending Ramps Up

Relative to the other semiconductor tool companies that I follow, Axcelis's (NASDAQ:ACLS) basic operating plan and drivers seem a little different than most. While the company is not unaffected by the drive toward new architectures in logic and memory chips, it's not as core to the story as it is for companies in other areas of the tool market like thermal processing, metrology, and packaging.

For Axcelis, the story is about carving out more share against Applied Materials (NASDAQ:AMAT), better addressing the full range of customers' ion implant needs, and exploiting growing investment in equipment for memory and "non-leading edge" chip types like sensors. Although I don't think Axcelis will achieve the same sort of margins I expect from Ultratech (NASDAQ:UTEK), Rudolph (NASDAQ:RTEC), or Nanometrics (NASDAQ:NANO), the market doesn't expect that either and there may still be some upside as the company heads towards a revenue peak in the next couple of years.

Read more here:
Axcelis Following A Different Plan As Semiconductor Tool Spending Ramps Up

The Ultratech Two-Step Continues

Although the market has cooled a bit on semi equipment names in recent months, Ultratech (NASDAQ:UTEK) continues to be its own worst enemy as revenue and order growth remain frustratingly erratic. On the positive side, the company enjoys a strong presence in advanced packaging and the support of major customers like Taiwan Semiconductor (NYSE:TSM), and it does seem as though the company's LSA tools are getting another look at 7nm and 10nm nodes. On the negative side, competition remains a real threat and it just seems like management cannot get this business on a steady trajectory.

A fair value in the mid-$20's is still valid assuming ongoing order growth in advanced packaging and 28nm laser annealing, with growth in inspection, nano, and sub-28nm annealing more of a "it'd be nice if it happened..." While the company does have over $9/share in cash on the balance sheet, it may be difficult for management to translate that into a meaningful M&A transaction.

These shares continue to have that "if they just get out of their own way" potential, but I can't argue that investors should favor this name over other equipment companies like Advanced Energy (NASDAQ:AEIS), Rudolph (NASDAQ:RTEC), and Orbotech (NASDAQ:ORBK) given the consistent inconsistency.

Read the full article here:
The Ultratech Two-Step Continues

Exciting Business Opportunities At Orbotech

I think there's a lot to like about Orbotech (NASDAQ:ORBK). The company is on the small side - or at least relative to giants like Applied Materials (NASDAQ:AMAT) and Lam Research (NASDAQ:LRCX) - but it doesn't play where it can't be a leader, and the company has three $300 million-plus markets to support growth in the coming years. Management has been pretty savvy at capital allocation and strategic decisions in the past, and I like Orbotech's chances to exploit demand tied to wearables, next-gen phones, IoT, and smarter cars.

Valuation is the fly in the ointment. The shares are near a 52-week high, as are many semiconductor tool companies, and today's price is about midway between my DCF-based fair value (which tends to run conservative for cyclical tech) and my margin-EV/rev-based fair value (which tends to run to the aggressive side). I think value investors would have to grit their teeth to love this one without making higher growth assumptions, but more momentum-oriented investors might find more to like.

Click here for more:
Exciting Business Opportunities At Orbotech

Seeking Alpha: Ultratech Still Predictably Unpredictable, But Orders Are Improving

Ultratech (NASDAQ:UTEK) is never going to be Honeywell (NYSE:HON) or Coca-Cola (NYSE:KO), so if you're looking for a consistent, predictable company without a lot of quarter-to-quarter surprises, please look elsewhere. What Ultratech does offer, though, is leverage to what looks like an improving semiconductor order cycle, as well as leverage to specific drivers like advanced packaging for logic chips, 3D metrology, and perhaps the ongoing move to smaller FinFET nodes.

These shares have done pretty well since my last write-up, with Ultratech's roughly 20% move ahead of the SOX Index (up about 12%), though not as strong as the 25% move at Applied Materials (NASDAQ:AMAT) and Rudolph (NYSE:RTEC). Valuation remains tricky; if the company could regain the 20%-plus operating margins and 15%-plus FCF margins of prior upswings, there would still be upside, but UTEK faces a lot of competition in its key markets, and there are legitimate questions about its ability to execute.

Please read more here:
Ultratech Still Predictably Unpredictable, But Orders Are Improving

Seeking Alpha: Advanced Energy Industries Looking For A New Start

The angst over the health/trajectory of semiconductor capital equipment orders hasn't hurt Advanced Energy Industries (NASDAQ:AEIS) any more (or any less) than most of its peers. Applied Materials (NASDAQ:AMAT) has been noticeably weak since my February piece on AEIS, due to the fallout of its aborted merger with TEL, but AEIS, MKS Instruments (NASDAQ:MKSI), Entegris (NASDAQ:ENTG), Lam Research (NASDAQ:LRCX) and ASML (NASDAQ:ASML) have all clustered around low-to-mid single-digit loses over that span.

Given how tied Advanced Energy Industries is, and will be, to the semiconductor industry, that's not an unreasonable performance. The company has a good track record and reputation in supplying the semi equipment market with power conversion systems, remote plasma sources, thermal instrumentation, and so on, but the fact remains that major equipment buyers like TSMC (NYSE:TSM) and Intel (NASDAQ:INTC) have generally been buying less than expected and guiding down with respect to their plans as development timelines stretch out and the fabs reuse older equipment to save money.

Looking ahead, I believe AEIS is making the right decision in cutting its losses in the inverter business. Likewise, I think management is on the right track in looking to expand its precision power business beyond the semiconductor industry and into areas like medical devices and aerospace/defense. The "new" AEIS will likely emerge as a better, more profitable company, but the current valuation seems to largely reflect that.

Continue here:
Advanced Energy Industries Looking For A New Start

Seeking Alpha: With Minimal Guidance, Ultratech Left Groping In The Dark

The last year hasn't been particularly kind to most semiconductor equipment companies, but Ultratech (NASDAQ:UTEK) has fared among the worst as the company has come up far short of the expectations that the company's laser spike annealing tools would play a significant role in the migration to 14nm/16nm FinFET chips at major manufacturers like TSMC (NYSE:TSM), Intel (NASDAQ:INTC), and Samsung. While emerging opportunities in advanced packaging, inspection, and atomic layer deposition take away a little bit of the sting, it hasn't been nearly enough to maintain the prior outlook.

Management hasn't been much help, as the guidance on the last couple of calls really hasn't shed much light on the outlook for the company's tools. I do not believe that management is misleading or withholding information from investors, but the lack of visibility in the market is a definite risk factor. So too is the risk that the company has lost enough share to companies like Screen Holdings (OTC:DINRY) and Mattson (NASDAQ:MTSN) that it threatens the basic thesis that Ultratech's tools offer much-needed advantages in performance.

There is a chance that Ultratech can support a higher valuation largely on the basis of its opportunities in advanced packaging, and the company's cash-rich balance sheet largely takes survivability off the table as an issue. Unfortunately, the lack of traction and visibility in thermal processing makes this more and more of a gamble/speculation than a real investment.

Continue here:
With Minimal Guidance, Ultratech Left Groping In The Dark

Seeking Alpha: Can KLAC Get Its Mojo Back?

Defensive is a word you have to use with some caution when talking about semiconductor equipment companies, but it is a word that has been applied to KLA-Tencor (NASDAQ:KLAC) in the past and with some reason. KLA-Tencor has historically been at, or near, the top of the industry list in terms of operating margins and the company has long held strong market share in its core inspection and metrology markets.

How much is defensive really worth, though? KLA-Tencor has outperformed Applied Materials (NASDAQ:AMAT) over the last five and ten years, but has lagged ASML (NASDAQ:ASML) and Lam Research (LCRX) and the comparisons get less favorable to KLAC at three years and one year. What's more, the company is acting a little strangely for a leader, seemingly backing away from actinic inspection and e-beam and potentially opening a door for rivals, and cutting staff going into a period that should see orders growing again.

If I thought KLA-Tencor were significantly undervalued I might be inclined to think of this as noise and opt to focus on the opportunities that should lie ahead at 10nm as Intel (NASDAQ:INTC) and TSMC (NYSE:TSM) look to ramp up spending. As it is, though, I have some concerns about KLA-Tencor's operating plan and the shares aren't cheap enough for me to ignore them.

Continue here:
Can KLAC Get Its Mojo Back?

Seeking Alpha: Ultratech Surprises To The Good, But Not Where Investors Want To See It

Investors can be fickle, and with that I have to wonder whether Ultratech (NASDAQ:UTEK) will hold on to the positive boost in sentiment that the company gained by reporting better earnings for the first quarter. Guidance for the second quarter was not as strong as could have been hoped, and there has been no easing of concerns regarding the company's ability to play a leading role in rapid thermal processing for sub-20nm chips and grab share from Applied Materials (NASDAQ:AMAT), Mattson (NASDAQ:MTSN), and/or Screen Holdings (OTC:DINRY).

Ultratech shares are still not pricing in any particularly significant ramp in sales or profits. That is in spite of real progress in diversifying the company's portfolio and recent growth in the advanced packaging opportunity. Although I cannot really model a scenario where Ultratech is shut out of the sub-20nm rapid thermal processing market and really thrives, progress with advanced packaging does at least provide some backstop. I continue to believe that Ultratech shares can generate double-digit returns from here, but this is a small position for me and I freely acknowledge that this remains much more of an "if" story than a "when".

Read the full article here:
Ultratech Surprises To The Good, But Not Where Investors Want To See It

Seeking Alpha: Ultratech's Order Outlook Is Murky At Best

The past year was a miserable one for Ultratech (NASDAQ:UTEK) shareholders. The recurrent theme of the year was that weak 14nm/16nm yields weighed on orders for new LSA tools, leading to multiples "shifts to the right" in order and revenue expectations. Expectations for 2014 revenue fell from the range of $180 million to $200 million in late 2013 to $147 million as of this writing and now there is concern as to whether Ultratech has lost share to Screen Holdings (OTC:DINRY) and Mattson (NASDAQ:MTSN) and whether 10nm might sap the 14nm/16nm cycle altogether.

This certainly showed up in the stock's performance. Ultratech fell 37% last year, while Mattson rose more than 19% and Screen rose almost 13% (Applied Materials (NASDAQ:AMAT), which also sells thermal processing equipment rose more than 36%). It's not hopeless at Ultratech, and the company does have growth opportunities in advanced packaging, metrology, and atomic layer deposition, but 2015 is likely to be a long year for shareholders without some visibility and encouragement in LSA orders.

Follow this link for more:
Ultratech's Order Outlook Is Murky At Best

Seeking Alpha: Ultratech Sliding To The Right ... Again

Sheryl Crow may have been right that the first cut is the deepest, but by the time you get to the third or fourth cut, they all get pretty annoying. Ultratech (NASDAQ:UTEK) continues to do the best it can, given that it's tethered to a team of horses (its customers) that don't seem to know where they're going or when they'll get there. FinFET development has proved frustratingly slow, but there are still credibly reasons to believe that this represents a $600 million-plus market for Ultratech's leading LSA tools.

What to do with the stock? Honestly, if you've made it thus far, I'd suggest holding on. The development of FinFET timelines (and tool orders) has been slower and more opaque than I'd expected, but I haven't really seen much to suggest that flash anneal from Dainippon Screen (OTC:DINRY) or Mattson (NASDAQ:MTSN) is the best way forward. When (and if) the orders materialize, Ultratech could double its revenue over two years. Of course, there is the risk that Dainippon/Mattson win over fabs and that Ultratech's LSA tools aren't adopted, so this is really only suitable for those with above-average risk tolerance.

Continue here:
Ultratech Sliding To The Right ... Again

Seeking Alpha: For KLA-Tencor, Strong Expertise Battling With Volatile End-Markets

When it comes to wafer fab equipment (or WFE) companies, strong market share and technical expertise is no guarantee of quarter-to-quarter or year-to-year performance. Foundries and IDMs have their own schedules when it comes to buying lithography, etch, deposition, inspection, RTP, or other tools and in combination with overall market demand and internal yields, that can lead to very erratic order patterns.

I fully expect KLA-Tencor (KLAC) to get its share of orders, and I believe the company's strong position in process diagnostic and control will serve it well as Taiwan Semiconductor (TSM) ramps up in 20nm and other foundries move toward 14nm/16nm FinFET and 3D NAND. KLAC has been an okay performer over the past year, lagging Applied Materials (AMAT) and Lam Research (LRCX), and outperforming others like ASML (ASML) and Hitachi High-Tech (OTC:HICTF), but it doesn't seem strikingly cheap relative to its historical valuation range and my cash flow estimates.

To read the full article, click here:
For KLA-Tencor, Strong Expertise Battling With Volatile End-Markets

Seeking Alpha: For Ultratech The Story Remains 'Ready, Set... Wait!'

The wait goes on at Ultratech (UTEK), and it's not a particularly pleasant one for investors (nor, I imagine, the company's executives and employees). Management noted increased quoting activity for LSA systems and continues to expect orders and shipments to materialize soon, but investors are left in a frustrating grey zone wondering when foundries will make their orders and how the annealing market will shake out between Applied Materials (AMAT), Ultratech, DNS (OTC:DINRY), and Mattson (MTSN).

Ultratech's first quarter results do offer a reminder that the company has other credible business lines, including advanced packaging and tools for high brightness LED manufacturing, but it is the ramp in laser spike annealing tools that will make or break the stock in the near term. Ultratech could still trade into the $30s from here, and investors are now only a quarter or two away on better visibility into this next round of annealing tool orders.

Follow the link to read more:
For Ultratech The Story Remains 'Ready, Set... Wait!'

Seeking Alpha: Mattson Looking For Advanced Chips To Drive The Cycle

Small-cap semiconductor equipment company Mattson Technology (MTSN), like most of its peers, has had its ups and downs recently as investors try to digest and interpret the guidance from major chip and foundry companies on their spending plans. Mattson still has the potential to leverage migration to 3D NAND and FinFET to significant revenue, profit, and cash flow growth, but it remains a risky call as it is a small player relative to Applied Materials (AMAT) and Lam Research (LRCX) and may find it difficult to maintain or grow its share during this next spending cycle.

Read the full article here:
Mattson Looking For Advanced Chips To Drive The Cycle

Seeking Alpha: Waiting For Ultratech, Or Waiting For Godot?

The difficult wait at Ultratech (UTEK) goes on, as investors are growing restless with the lack of much-needed laser spike annealing orders. While I still believe that Ultratech has very competitive technology in this market and that LSA is going to be vital to sub-20nm chip production, that belief is being tested in the face of poor ordering results. In the meantime, growth in the advanced packaging, metrology, and ALD is nice to see, but not enough to drive the stock.

Recreating the company's past market share in LSA in this next generation of chips would still make this a stock very much worth owning. I would also point out that the company has nearly $10 a share in cash on the balance sheet on a fully-diluted basis. It must be said, though, that Ultratech is getting very close to that "put up or shut up" point where talking about technology and revenue potential feels pointless in the face of relative performance data from Applied Materials (AMAT), Dainippon Screen (OTC:DINRY), and perhaps Mattson (MTSN).

Read more here:
Waiting For Ultratech, Or Waiting For Godot?

Seeking Alpha: Ultratech Has To Deliver The Orders This Year

Tech investors may have short memories, but they are quick to punish companies that cannot deliver the goods when it comes to growth. Ultratech (UTEK) has most definitely been a disappointment over the past year, as enthusiasm over the odds of the company seeing its laser spike annealing tools adopted into advanced semiconductor nodes has given way to the reality of significant share loss at the 20nm (most likely to Dainippon Screen (OTC:DINRY)).

Amidst that disappointing backdrop of 2013, the shares have rallied about 20% in recent months. Multiple factories have made LSA the process of record in their 16nm/14nm nodes, and most factories are looking at LSA at multiple steps - increasing the overall addressable market. The key question, though, is whether Ultratech can beat companies like Applied Materials (AMAT) and get the orders and rebuild its share. I'm still bullish on these shares (and still an owner), but for all of the interesting potential in areas like advanced packaging, LEDs, and metrology, it will be the LSA orders in 2014 that really move this stock.

Continue reading here:
Ultratech Has To Deliver The Orders This Year

Seeking Alpha: Mattson Technology: A High-Beta Play On 20nm And Below

Fellow Seeking Alpha contributor Ashraf Eassa and I have both written previously about Ultratech (UTEK), a semiconductor equipment company that we both like for its innovative positions in laser spike annealing (LSA) and advanced packaging lithography ("flip chips"), as well as the potential of its steppers in LED manufacturing. In particular, we have both made the case that advanced annealing technologies are likely to be a critical factor in the move to sub-20nm processes.

Ultratech isn't the only game in town, though, and there are multiple technologies and process steps that are going to play significant roles in the production of FinFETs and 3D circuits. With that, I would take a look at Mattson Technologies (MTSN), as this company has already accomplished the not-so-easy task of gaining meaningful share in the dry strip, rapid thermal processing (RTP), and etch markets despite competing with giants like Lam Research (LRCX), Applied Materials (AMAT), and Tokyo Electron (TOELY.PK).

While 2013 has proven to be a very disappointing year for semiconductor equipment orders (and much like waiting for Godot), I don't believe this stagnation is sustainable. Foundries and chip companies can only delay orders and repurpose older equipment for so long. With that, I believe orders will begin to recover in late 2013/early 2014 and bring Wall Street back to the view that Mattson has the collection of tools and technology to challenge its prior record revenue levels - an achievement that I believe could take the shares to $3 or above.

Please read the full article at Seeking Alpha:
Mattson Technology: A High-Beta Play On 20nm And Below

Investopedia: Applied Materials Still Waiting For Orders To Materialize

Applied Materials (Nasdaq:AMAT) is an interesting company (and stock) today. With 3D chips on the way, it looks like the semiconductor equipment industry is looking at both a large increase in orders and a change in the sort of equipment that chip companies will need to stay on the leading edge. With strong share in equipment categories that should be essential to FinFETs, Applied Materials should be looking some strong years. But as this quarter highlights pretty clearly, there are a lot of unknowns about timing and investors are still a little hesitant about bidding up these shares ahead of the next cycle.

Please continue here:
http://www.investopedia.com/stock-analysis/081913/applied-materials-still-waiting-orders-materialize-amat-klac-lrcx-utek.aspx