Cautious Hold on Axcelis Technologies Amid Structural and Geopolitical Challenges

William Blair analyst Jed Dorsheimer has reiterated their neutral stance on ACLS stock, giving a Hold rating yesterday.

Jed Dorsheimer’s rating is based on several factors impacting Axcelis Technologies. Despite a surprising margin beat, Dorsheimer believes the structural upswing for power semiconductors and capital equipment has not yet commenced. Axcelis trades at a significant discount compared to its peers, which might seem appealing, but Dorsheimer views this discount as justified due to the company’s limited exposure to AI and advanced nodes, which are currently dominating the semiconductor sector.
Additionally, the gross margin beat was attributed to a one-time favorable mix in the CS&I business, and Dorsheimer expects margins to normalize throughout the year. The operating margin is anticipated to decrease significantly as revenue drops while operating expenses remain unchanged. Furthermore, although the book-to-bill ratio has improved, ongoing demand weakness, particularly in China, remains a concern. The reduced revenue contribution from China, coupled with geopolitical uncertainties, adds to the cautious outlook, reinforcing the Hold rating.

In another report released yesterday, B.Riley Financial also maintained a Hold rating on the stock with a $58.00 price target.