Revenue of $123 million for the quarter was below analysts' average estimate of $126.4 million. The company said Thursday night it sees third quarter revenue about flat with last quarter.
What’s important, though, says Needham & Co. analyst Robert Maire in upgrading the stock Friday from Hold to Buy, is that the company’s technology is winning it business in next-generation chip lithography, which sets up the company for a bounce-back despite the current sluggish sales results. In particular, a deal to supply equipment maker ASML Holding (ASML) is “a very key win which virtually cements Cymer's position in next generation lithography with its primary competitor remaining Gigaphoton in Japan.”
Digging into the details of the lithography laser market, Maire writes:
About 27 of the light sources shipped in the quarter were XL Series [Argon Flouride] light sources, and more than half of those were XLA 300 and XLA 400 models. Cymer’s [Argon Flouride] immersion share has remained at 90%. There was a substantial increase in orders for the XLA 300 and XLA 400 light which have longer lead times, and therefore some of these systems are scheduled for delivery in the fourth quarter.
Although Maire is lowering his sales and profit estimates for this year and next, his point is that customer wins can be delayed a quarter or two, implying there could be more good news of deals down the road: “Cymer’s cycle times are well below a quarter,” notes Maire. “This means that the disconnect between ASML, Nikon (NINOY.PK) or Canon (CAJ) getting an order and Cymer getting an order for a light source associated with the tool is at least one to two quarters if not more.” And so, “The long term outlook for Cymer is even better given recent events even with unit sluggishness at scanner makers.”
After Friday’s run, the stock doesn’t have much room, however, to hit Maire’s price target of $47, which represents 18x his 2008 EPS estimate of $2.64.
CYMI 1-yr chart:
