What we think about Axcelis (ACLS)

Axcelis in Three Words: Ion Implantation Leader

Axcelis is a global leader of the ion implantation equipment used for semiconductor manufacturing.

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Background

Axcelis plays an important role in the massive semiconductor industry. Its ion implantation machines dose chips with boron, aluminum, and other molecules to help direct the flow of electrons through the circuit. With 35 years of operating history and longstanding relationships with the largest fabs and foundries, it’s a unique leader in its niche with a strong competitive position.

Axcelis’ backlog of $1.2 billion represents a full year’s worth of future revenue that’s already on the books, as mega-customers like Texas Instruments, Samsung, and Wolfspeed are aggressively building new manufacturing fabs across the globe. One area worthy of special interest is silicon carbide, the high-bandgap wonder material that improves the efficiency of power conversion needed for electric vehicles and the power grid. Axcelis expects that equipment sold for silicon carbide fabrication will account for 35% of this year’s system sales, and it’s estimated that its best-in-class Purion product line has 70-80% market share of the fast-growing silicon carbide market.

With a new CEO and slower-than-anticipated growth in silicon carbide production, uncertainty is surrounding Axcelis. It's stock has reflected that, now selling as of July 2024 at just 4x sales and 14x earnings -- which is nearly a 7 year low.

Conviction Rating Changes

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Recent Company Updates

February 11, 2025:

Axcelis' fourth quarter results caused the stock to sell off in response to its anemic bookings and tepid forward guidance. Management admits their highly cyclical industry is in a funk right now, and they're expecting only $185 million of revenue in the upcoming first quarter and less than $1 billion during fiscal 2025.

There's no way to sugar-coat this: the forward guidance stinks. After several years of Axcelis growing at 20-50% per year, it's now in a phase where it's reporting negative growth rates.

The question then becomes whether this is a permanent impairment or just a temporary blip? And I'm inclined to believe it's the latter.

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