Axcelis Technologies (NASDAQ:ACLS) shares have been under pressure over the last three months; stock has dipped more than 27%. Investors always see the dip in price as a buying opportunity, but only if the stock has strong fundamentals. Legendary investor Warren Buffet once suggested that investors should buy stocks when others are fearful, so let’s take a look at the financials and fundamentals to see whether an Axcelis Technologies investment is worth it.
Why the stock dipped?
The company’s stock came under pressure after the announcement of lower than expected margins for the third quarter and fiscal 2017.
The selloff intensified last month after its presentation at the Needham Growth Conference. During the presentation, Axcelis management presented a low guidance on margins, due to pricing pressure and product mix.
Based on target revenue of $450M for the year, the company expects 37% gross margin (down from 40 – 42%) and operating margin of 14% (vs. 14 – 17%).
The company also expects pressure on its financial numbers, which are likely to increase at a mid-single digit rate, compared to the double-digit growth in the last three years.
>>Viavi Solutions Soar Despite Lower Y/Y Results. Find Out Why
In the latest quarter, its revenue was standing around $104.5 million, slightly higher from $102.8 million sequentially. Axcelis Technologies expects to generate revenue in the range of $104 million for the final quarter, equal with the third quarter of FY2017.
Where Could the Stock Go From Here?
After the sharp growth in share price in the first three quarters, investors have capitalized on the massive share price rally, amid the threat of lower sales and depressed margins. Thus, oversold conditions declined Axcelis stock to around $24, significantly lower from the 52-week high of $37 a share. Despite the huge selloff, the stock is trading at 21 times the earnings, slightly lower from the industry average 24 times. Moreover, its financials are unlikely to offer a strong support to the share price.
Rating agencies have a mixed opinion on Axcelis Technologies. BidaskClub has declined ACLS price target and downgraded it from a “hold” rating to a “sell” rating. On the other hand, Zacks and ValuEngine have strong buy ratings for Axcelis stock. Should you take Warren Buffet’s advice in this scenario? Is an Axcelis Technologies investment worth it?
Featured Image: facebook
