Advanced Energy Industries (AEIS) is a global leader in power conversion. Incorporated in 1981, the Denver-based company provides power conversion, measurement, and control solutions for semiconductor and thin-film plasma processes. Additionally, AEIS offers high- and low-voltage power products that can be used in a range of applications, including hyperscale data centers, with direct and indirect sales operations across North America, Europe, and Asia.
Valued at $4.02 billion, AEIS is a component of the small-cap benchmark Russell 2000 Index (RUT), as well as the S&P SmallCap 600 ($IQY).
Advanced Energy Outperforms With Q2 Results
Advanced Energy reported its Q2 results on July 30, with adjusted earnings of $0.85 per share beating market estimates of $0.69 per share. Revenue for the quarter fell 12.2% year over year to $364.95 million, which still surpassed the average forecast of $350.54 million.
Revenue from semiconductors increased by 9% from the year-ago quarter, while revenue from data centers and computing rose 23% YoY. On the other hand, revenue from the industrial and medical division fell by 38%, while telecom and networking revenue was down 55%.
AEIS generated $6.9 million in cash flow from continuing operations during the quarter, and ended Q2 with a cash balance of $986 million, up more than 100% YoY.
During the quarter, Advanced Energy paid $3.8 million in quarterly dividends. Based on its quarterly cash dividend of $0.10, AEIS yields 0.37%, with a conservative payout ratio of around 12%.
AEIS Lands a New Street-High Price Target
Advanced Energy currently has a consensus “Moderate Buy” rating on Wall Street, with 3 analysts calling the stock a “Strong Buy” and 3 more recommending a “Hold.” The mean price target of $117.38 indicates an upside potential of 6.2% from current levels.
Last week, AEIS added a new “Strong Buy” rating when Stifel initiated coverage with a bullish note.
Analyst Brian Chin wrote that AEIS stock looks undervalued now, and sees "this valuation gap narrowing as evidence of broader cyclical recovery and company execution is more apparent." He also likes the company's broad portfolio, which he views as "capable of providing diversified revenue growth and improving cross-cycle profitability."
Stifel has the new Street-high price target of $135 for AEIS, reflecting an upside potential of 22% from current levels. Priced at just under 20 times expected 2025 earnings, AEIS could be a reasonable growth stock to scoop up now.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
