Advanced Energy Industries (AEIS -0.4%) is upgraded to Buy from Hold with a $65 price target at Needham, which cites expectations for management to raise its target model, growth in the SemiCap and Industrial segments, and a strong margins profile.
The firm believes AEIS is one of the few unique growth stories in its SemiCap coverage and will continue to deliver higher profitability and shareholder returns in the coming years.
AEIS enjoyed a 94% run-up in 2016, but Needham sees further upside to the share price as investors to gravitate to the highest quality names.
At current levels, Advanced Energy's (NASDAQ:AEIS) accelerated buyback is good for repurchasing over 4% of outstanding shares. The purchases will occur through the company's existing $150M buyback authorization (created in September).
AEIS had $199M in cash at the end of Q3, and no debt.
Advanced Energy (NASDAQ:AEIS) has used its 2015 investor day to announce a $150M, 30-month, buyback, good for repurchasing 14% of shares at current levels. AEIS had $183M on its balance sheet to pay for buybacks with at the end of June.
The buyback is part of a new capital allocation plan under which the company aims to "deploy approximately 70% of its future free cash flow to organic investments and acquisitions and 30% to share repurchases."
Meanwhile, in its investor day slides (.pdf), AEIS has guided for Q3 revenue (excluding inverter sales) of $102M-$110M and op. income of $25M-$30M. The Q3 revenue consensus, which might not fully account for AEIS' recent decision to wind down its solar inverter ops, is at $127.5M.
Advanced Energy (AEIS +11.2%) is upgraded to Positive from Neutral with a $35 price target, raised from $22, at Susquehanna, which says the company's restructuring and execution give it greater earnings power.
The firm expresses greater confidence in the company's earnings power, given that the new team continues to execute during the divestiture of the loss-making solar inverter division.
The firm also expects AEIS to drive its free cash flow margin to at least 20%/year over the next few years, driven by its leaner business model.