For retail investors, seeking solid clues to the probable movements of the equity markets, the great volume of published analysis from the Wall Street experts is a blessing, making available everything the investor needs to know to trade successfully. But it comes with a price. The sheer quantity of data involved is almost impossible for the non-expert to parse, but how to know which of the 7,700 stock pros is the best to listen to?
A look at the Top Wall Street Analysts ratings from TipRanks can clear that air. The list shows the 100 best analysts from the Street’s investment and banking firms, and ranks them by such factors as their overall success rate and the average return their calls have generated in the past year. These are carefully chosen measures, as they directly indicate the analyst’s success in reviewing stocks.
And by those measures, one Wall Street pro stands taller than the rest. Quinn Bolton, from Needham, holds the #1 ranking among his peers, based on the 82% accuracy of his stock ratings, and the 54% average return those calls brought for investors who followed them. We’ve used the data tools at TipRanks to look up the details on two of Bolton’s picks, to find out what the Street’s best analyst looks for when he goes bullish on a stock.
Advanced Energy Industries (AEIS)
We’ll start with a tech company. Advanced Energy designs, develops, and markets the tech hardware that makes everyone else’s products work. The company has an extensive line of plasma power generators, high voltage power supplies and amplifiers, low voltage power supply units, temperature measurement devices, electrostatic measurement instruments, and gas sensors, all vital components for a variety of applications in data centers, manufacturing, semiconductor production, and telecom.
The value of this niche can be seen in the company’s recent annual revenues – which prior to this year’s supply chain bottlenecks were consistently rising. The top line for fiscal 2019 was $718.9 million; in fiscal 2020, that rose to $1.45 billion. For the first three quarters of 2021, however, the company’s revenue is at $1.06 billion, and on track to come in just under last year’s total.
Looking at the recent 3Q21 report, we find that the top line of $346 million was down both sequentially and year-over-year (by 4% and 11% respectively) – although it did beat the midline of the company’s own previous guidance. EPS was reported at 89 cents, also above the guidance midline – but down 46% yoy.
The sliding revenues and earnings, and the supply chain/production problems behind them, spooked investors this year, and AEIS shares are down in the past 12 months. The stock has been highly volatile over the course of 2021, but the downward trend was clear; it has lost 28% since its January peak.
Bolton, for his part, remains bullish on the stock. He writes, “Due to constraints of certain semiconductor components, AEIS revenue disappointed expectations in 2021 and the company’s shares underperformed…. As we look into 2022, we believe better component availability will enable AEIS to begin to catch up on pent-up demand for its power conversion systems (backlog has nearly tripled since 4Q20). As revenue recovers, we see strong GM and OM leverage driving NG EPS to $6.00 or more on an annualized basis by year-end 2022 with annualized earnings power growing further to $7.00 in 2023. As investors gain confidence in this earnings power, we believe AEIS is likely to outperform peers.”
In light of this position, Bolton upgrades his stance on the shares to from Neutral to Buy, and he sets a $120 price target which indicates room for 37% price appreciation in the year to come.
Not everyone on Wall Street is as upbeat on Advanced Energy as the Needham analyst; the stock has 7 reviews, which include 4 to Buy and 3 to Hold, supporting a Moderate Buy consensus. The shares are selling for $89.05 and their $106.29 average price target indicates an upside of 19% for next year. (See AEIS stock analysis at TipRanks)
ACM Research (ACMR)
How do you define a vital industry? We can’t get by without automobiles in today’s world, so they’re essential. But cars won’t go without semiconductor chips installed in their onboard computer and sensor systems, making the chips essential to the vehicle industry. And the chips won’t hit the market without an array of specialized manufacturing tools and tech that makes it possible to produce the silicon wafers. This deeper level of essential industry is where ACM Research exists. The company is a developer of wet processing technology, a crucial stage in all semiconductor manufacturing. Without ACM’s proprietary technology and advanced tools, it would be impossible even to create a pure silicon wafer to start the chip process.
Looking at the company’s latest quarterly statement, we see that the Q3 report put the top line at just over $67 million, up 40% yoy and the highest level in over two years. On earnings, adjusted EPS came in at 56 cents, up from 42 cents in the year-ago quarter. Gross margins in the quarter rose from 42% to 44% yoy.
In an important recent development, the company announced at the start of December that it had received orders for a preliminary shipment of tools and wafer cleaning technology for a major US-based semiconductor manufacturer. The first order to this customer (name not disclosed) is set for 1Q22, as an evaluation order to confirm ACM’s suitability for the user. Production tools for a high-end manufacturing line are scheduled for 2Q22. The move marks a major shift of ACM’s emphasis toward the US market.
This is another stock that has struggled in the market this year. The share price has been highly volatile and after peaking near $140 in February has tilted into the red.
Nevertheless, Needham’s Bolton believes the stock’s current valuation represents an opportunity and he sees the company’s performance and future contracts as the key points. He writes, “…we believe the current share price does not fairly reflect growth expectations for the company. We believe the narrative is shifting from a single segment (wet clean) China play among WFE stocks toward a multi-product, global expansion story within the group.”
He goes on to note that ACM’s shipments to new customers are an excellent leading indicator of future revenue, and then elaborates on the company’s incipient shift away from its China business: “During 4Q21 alone, the company has announced design wins with four global IC manufacturers including one in the U.S. Management’s strategy is to introduce the company’s tools (ex: ECP, SAPS, Ultra C pr wet strip, and furnace) at these manufacturers’ Asia-based facilities with acceptance of the eval tools leading to additional production orders at other facilities outside the region.”
Bolton’s comments support his Buy rating on the stock – an upgrade from a previous Neutral. He sets a price target of $100, suggesting a one-year upside potential of 29%. (To watch Bolton’s track record, click here)
While there are only 3 recent reviews of this stock on record, they are all in agreement – and bullish, making for a unanimous Strong Buy analyst consensus rating. The shares are currently trading for $77.62, and the $119 price target is even higher than Bolton’s, and implies a 53% upside in the next 12 months. (See ACM stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.