American Superconductor, also known as AMSC, is Thursday's pick for IBD 50 Growth Stocks To Watch. The power systems stock has been volatile since November after a failed breakout of a cup-without-handle base and an earnings report in early February.
The IBD 50 stock was sinking around 9% Thursday, as a number of leading stocks faced headwinds during the session. The move may be in sympathy with the 9% drop in SolarEdge Technologies, after the solar power stock got a downgrade from BMO Capital to underweight from market perform.
AMSC provides engineering services and makes equipment and power systems used in wind turbines, electrical systems and ships. It also makes equipment for U.S. Naval ships. On Wednesday news broke that U.S. Defense Secretary Pete Hegseth has ordered the military's leaders to work up plans for an 8% defense budget cut, possibly affecting the stock.
American Superconductor ranks No. 1 out of 48 stocks in the Electrical-Power/Equipment group, which holds the No. 96 spot out of the 197 industry groups that Investor's Business Daily tracks.
Stocks To Buy And Watch: Top IPOs, Big And Small Caps, Growth Stocks
AMSC Stock Tests Moving Average
AMSC stock broke out of a third-stage cup base in early November and hit a 52-week high, but the stock bounced around before plummeting in early December. The steep drop below the 50-day moving average triggered a sell signal in mid-December.
Shares got reinvigorated following the company's fiscal third-quarter earnings report on Feb. 5. The stock shot up 34.2% and started forming a flawed, deep cup-with-handle base with a 35.44 handle buy point. But the handle is now too deep at 20%. IBD Methodology looks for proper handles no deeper than around 12%.
The power systems stock seems to have resistance around the 33 price level while its 52-week high of 38.02 has not been topped since November 2012.
Shares undercut the 21-day exponential moving average Thursday and are seeking support at the 50-day line. Its 50-day line is starting to trend downward, as seen on the MarketSurge chart, a sign of weakness.
Leading Power Systems Maker Shows Robust Sales
American Superconductor beat fiscal third-quarter earnings and sales estimates on Feb. 5, and gave a fiscal fourth-quarter revenue outlook with its midpoint above views.
"Bookings and backlog during the quarter continued to be robust," AMSC Chief Executive Daniel P. McGahn said in the earnings news release.
The company reported 16-cents per share adjusted profit in its third quarter vs. three-cents per share a year ago. Sales growth has been hearty, with a 56% increase in its third quarter, following 33% and 60% gains in the prior two quarters.
Revenue projections show a 43% rise in the current quarter, followed by 51% then slowing to 13% and 4% over the next three quarters.
Fiscal 2025 profit forecasts call for earnings of 61 cents a share, up from a modest 2 cents a share in 2024.
Follow Kimberley Koenig for more stock market news on X, the platform formerly known as Twitter, @IBD_KKoenig.
