II-VI, Inc.: 5G Stock Up 20% in 2021 & Still Has Massive Upside Potential

II-VI Stock Climbs to Record Territory on Strong Q1 Results

II-VI, Inc. (NASDAQ:IIVI) is a great tech stock for those who want access to the 5G and cloud computing industries—among others. A leading provider of scientific and technical instruments, II-VI, Inc. (pronounced “two-six”) has seen its share price surge significantly since early November.

Many stocks have gone higher since President Joe Biden won the election in November, but IIVI stock hasn’t climbed just because of investor optimism.

II-VI stock ramped higher because the company reported strong financial results on November 5. Since then, the stock has advanced by a whopping 85%. IIVI stock is also up 145% year-over-year and 20% year-to-date.

These are strong gains, and despite both II-VI stock and the broader market being at record levels, the stock still has lots of room to run in 2021. That’s because II-VI, Inc. has its tentacles in many high-growth areas, including 5G and autonomous driving, two industries that are just getting warmed up.

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IIVI Stock Overview

Your high-school chemistry teacher was right: the periodic table of elements has real-world applications. The Roman numerals in “II-VI, Inc.” refer to group two and group six of the periodic table. Group two includes alkaline metals and group six contains transition metals. (Source: “Investor Presentation: November 2020,” II-VI, Inc., last accessed January 21, 2021.)

Chemically combining the two groups helped the company produce infrared optical crystalline compounds, which are integrated in the company’s scientific devices.

The company operates through two segments: Compound Semiconductors and Photonic Solutions.

II-VI, Inc.’s biggest division involves infrared optical communications, which is used in cloud computing, data centers, and telecommunications. The company also provides the silicon carbide substrates that are found in 5G mobile infrastructure (5G optics and radio antenna), electronic vehicles, 4G wireless radio heads, 3D sensing in consumer electronics, and LiDAR (remote sensing).

Having a strong foothold in multiple strong and growing markets has allowed II-IV to report strong revenue growth. From fiscal 2016 to fiscal 2019, the company’s revenue expanded at a compound annual growth rate (CAGR) of 18%, from $827.0 million to $1.3 billion.

Those figures do not include the company’s 2019 acquisition of former rival Finisar Corporation for $3.2 billion. The merger created one of the world’s largest optics and photonics companies, with 25,000 employees in 70 locations around the world.

The combined annual revenue of the two powerhouses is expected to be in the area of $2.6 billion for fiscal 2020. That represents a 94% increase over the fiscal 2019 revenue of $1.3 billion.

II-VI, Inc.’s enviable list of customers includes Lockheed Martin Corporation (NYSE:LMT), Nokia Oyj (NYSE:NOK), Cisco Systems, Inc. (NASDAQ:CSCO), Ford Motor Company (NYSE:F), and Corning Incorporated (NYSE:GLW).

Strong Q1 Results

On November 5, II-VI announced that its revenue for the first quarter of fiscal 2021, ended September 30, 2020, increased 113% year-over-year to $728.1 million. (Source: “II-VI Incorporated Reports Fiscal 2021 First Quarter Results,” II-VI, Inc., November 5, 2020)

By end market, Communications accounted for most of the company’s revenue in the first quarter, at 70%, followed by Industrial (nine percent), Aerospace & Defense (seven percent), Consumer Electronics (seven percent), Semiconductor Capital Equipment (five percent), and Life Science (two percent).

By region, 50% of the company’s sales came from North America, followed by China (22%), Europe (19%), Japan (six percent), and the rest of the world (three percent).

II-VI, Inc.’s operating income was $101.1 million, compared to a first-quarter 2020 operating loss of $18.5 million. Its adjusted operating income was $138.9 million, versus $49.0 million in the same prior-year period.

The company reported first-quarter net income of $46.3 million ($0.38 per share), compared to a first-quarter 2020 net loss of $26.0 million ($0.39 loss per share). Its adjusted earnings per share were $0.84, compared to $0.53 in the same prior-year period.

Analyst Take

II-VI, Inc. has a leading market position in the world’s greatest tech megatrends, including 5G, cloud computing, and autonomous vehicles.

Thanks to the proliferation of cloud services, deployment of 5G wireless, increased data and video consumption, adoption of 3D sensing, and growth in electric and autonomous vehicles, the company should continue to experience huge demand for its products. And that could lead II-VI stock to keep climbing.