ACM Research Inc: Niche Semiconductor Stock up 496% YOY & Still Bullish

ACM Research up 370% Since March, But Still Bullish

ACM Research Inc (NASDAQ:ACMR) is a major player in a very specialized niche of the tech market. This might explain why its share price has been on a tear.

ACM Research stock has soared 496% over the last 12 months, has gone up approximately 90% year-to-date, and has advanced 370% since the March sell-off.

Why the ongoing bullishness? ACM reported strong second-quarter results and raised its full-year guidance, with total 2020 revenue expected to climb between 30% and 49% and advance another 30% next year. On top of that, net income is poised to climb more than 20% in 2020 and 30% in 2021.

Strong numbers during an era when a coronavirus pandemic has taken the wind out of the sails of many tech stocks.

ACMR stock did take a hit during the two big broad-based pullbacks in 2020: the March crash and September sell-off. It quickly erased losses associated with the March crash, and it’s on its way to doing the same with the September pullback. Strong third-quarter results, which will be announced in early November, could send it back up into record territory.

Chart courtesy of StockCharts.com

AMC Research Inc Overview

ACM Research has developed a wet processing technology that removes chemical and other contaminants from  advanced semiconductor devices. The company’s equipment is used for a wide range of applications in integrated circuit (IC), also called a chip or microchip, manufacturing, and wafer level packaging. (Source: “Company,” ACM Research Inc, last accessed October 16, 2020.)

As microchips become more complex, so too do the requirements to clean them. In fact, each new wafer can now require as many as 200 cleaning steps during the manufacturing process.

During that process, the wafer cleaning must be aggressive enough to remove small defects across the entire surface of the wafer. The cleaning process must also be gentle enough not to damage the fragile 2D and 3D circuit structures.

In September 2006, the Freemont, CA-based company expanded its operations into Asia, forming the subsidiary ACM Research (Shanghai), Inc. In June 2011, it formed a second subsidiary, ACM Research (Wuxi), Inc.

Q2 Revenue up 34.6%, Full-Year Guidance Raised

On August 5, ACM Research Inc announced that revenue for the second quarter ended June 30 increased 34.6% year-over-year to $39.0 million. (Source: “ACM Research Reports Second Quarter 2020 Results,” ACM Research Inc, August 5, 2020.)

The company attributes the growth in revenue to increased demand for single wafer wet cleaning and other front-end processing equipment and back-end wafer assembly and packaging equipment.

ACM Research Inc reported a second-quarter net loss of $0.1 million, or breakeven per share, compared to second-quarter 2019 net income of $4.3 million, or $0.23 per share.

The company noted that tax expenses and the effects of foreign-exchange fluctuations resulted in a loss of $0.9 million, compared to a net gain of $0.6 million in the second quarter of 2019.

Adjusted net income was $6.2 million, or $0.29 per share, a 26% increase over second-quarter 2019 adjusted net income of $4.9 million, or $0.26 per share.

ACM Research ended the second quarter with cash and cash equivalents of $86.4 million, compared with $52.3 million at the end of the first quarter of 2020 and $27.6 million at the end of the second quarter of 2019.

Dr. David Wang, ACM Research’s president and CEO, commented, “We are pleased with our second quarter results. Our revenue and shipments rebounded significantly following the COVID-19 related pause in the first quarter. We have strong visibility for remainder of 2020, with solid demand for current and new products, and we have raised our outlook accordingly.”

Business Outlook

For fiscal 2020, ACM Research Inc now expects to report total revenue in a range of $140.0 million to $155.0 million, up from previous guidance of $130.0 million to $150.0 million. This represents year-over-year revenue growth of between 30% and 49%.

The strong revenue growth projections are based, in part, on the coronavirus situation improving in China and stabilizing over the coming months around the world.

Analyst Take

ACM Research Inc is the leader in a very lucrative niche market in the IC supply chain.

Demand for the company’s wet cleaning process is up and the company continues to launch new products and announce new customer winds. All of this helped it report strong second-quarter results, which, in turn, allowed it to increase its full-year guidance.

Next year looks like it will be another period of strong growth for ACMR stock. Which is impressive, when you consider 2019 was a remarkable year for ACM Research Inc, during which time it ramped up production capacity and delivered 44% revenue growth.