Axcelis Technologies took off following its recent earnings report in early May, hitting a buy point of a base on Wednesday, and is the IBD 50 Stocks To Watch pick.
The Beverly, Mass.-based company provides spare parts, equipment upgrades and maintenance services to the semiconductor industry.
More specifically, Axcelis Technologies produces ion implantation equipment used in the fabrication of semiconductor chips. Its products are developed and manufactured mainly in the U.S. and South Korea, and are sold in the U.S., Europe and Asia.
A high 64.7% of its March quarter revenues came from its 10 largest customers. If several big customers were to leave, it could be a revenue-impacting event.
Axcelis Technologies holds the No. 2 spot out of 29 stocks in the Electronics-Semiconductor Equipment group. The group ranks 42nd out of the 197 IBD industry groups.
The CAN SLIM investing strategy seeks stocks in the top 40 or higher industry groups.
Axcelis Technologies Breaks Out Of Base
Shares jumped another 4% Thursday following Wednesday's spike, as tech stocks continued to rally. Shares Thursday afternoon were slightly above the 5% buy zone, which tops out at 143.30.
ACLS popped 6% and broke out of a cup-without-handle base on Wednesday, hitting the 136.48 buy point. Although price action was strong, volume was only about average.
The formation is in a desirable second-stage base, according to MarketSmith pattern recognition.
The relative strength line hit a 52-week high, as shown with the blue dot on the weekly MarketSmith chart. Shares hit an all-time high Thursday, and have gained over 80% this year so far.
The stock hit the low of the base on May 4, following volatile trading that greeted the Q1 earnings report. Results topped expectations, but the company's outlook was cautious.
The stock quickly reversed course the next day, and has been on an upward trajectory ever since. Shares have gained over 25% since the earnings release.
ACLS reclaimed the key 50-day moving average this week, as chip and tech stocks outperformed.
Earnings Beat Projections But Pace Slows
Axcelis Technologies reported better-than-expected first quarter EPS and sales on May 3, after the market close. The 17% quarterly profit growth lagged the 63% and 49% growth in the prior two quarters, and triple-digit increases prior to that.
Quarterly sales growth of 25% slowed from the 29% and 30% the prior two quarters.
"Axcelis delivered strong first quarter financial performance with a new backlog record, as a result of significant demand and solid execution by the Axcelis team," said Mary Puma, president and CEO.
Management expects revenues between $255 million and $260 million, with full-year sales of more than $1.03 billion.
Q1 gross margin rate fell to 40.9% from 44.1% in the same quarter a year earlier. The drop came primarily from a less favorable mix of system shipments.
Management projects 42% gross margin for Q2, and 44% for full-year 2023, up slightly from the 43.7% in 2022.
Analysts expect 20% full-year earnings growth this year, and 17% next year; that's on top of the nearly 90% growth in 2022.
Mutual Funds Support Stock; ACLS Earns Accolades
Mutual funds own 58% of shares, with 573 holding the stock in March, up from 515 in December.
Two funds in the IBD Mutual Fund Index increased their holdings in ACLS shares in the March quarter. Columbia Small-Cap Index/Institutional (CXXRX) added 280,000 shares, and it is a top holding. Invesco Discovery Fund A (OPOCX) added 260,000 shares.
Axcelis Technologies earned a place on the 2022 Fortune 100 Fastest Growing Companies. In addition, it landed on the 2022 Forbes Best Mid-Size Companies list.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
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