Kulicke & Soffa: Is The Market Really This Patient?
Shares Of Kulicke And Soffa Should Be Bought Here
Alpha Gen Capital
Alpha Gen Capital
Fri, May 20, 10:56 AM
- Lam Research (LRCX +4.1%), KLA-Tencor (KLAC +2.3%), ASML (ASML +2.2%), Axcelis (ACLS +3.9%), Kulicke & Soffa (KLIC +3%), Ultratech (UTEK +3.5%), Teradyne (TER +2.3%), Rudolph Technologies (RTEC +2.6%), and Xcerra (XCRA +2.7%) are outperforming after Applied Materials (AMAT +13.2%) beat FQ2 estimates, provided FQ3 guidance that was well above consensus, and reported FQ2 orders rose 52% Q/Q and 37% Y/Y to $3.45B. The Nasdaq is up 1.2%.
- Applied's order growth was fueled in large part by display equipment orders totaling $700M, up sharply from $183M in the prior quarter and $120M a year ago. On its earnings call, AMAT said display order strength is likely to continue "over the rest of 2016," and is being driven by mobile-related OLED investments - many reports have indicated Apple plans to bring iPhones sporting OLEDs to market next year.
- OLED materials/IP provider Universal Display (OLED +5.2%) is rallying. As are display panel makers LG Display (LPL +6.5%) and AU Optronics (AUO +3.2%), each of which have been stepping up their OLED investments, and industrial laser maker Coherent (COHR +2.5%), which has recently seen an OLED-related order surge.
- Also: Applied's NAND flash-related orders more than doubled Y/Y to nearly $1B thanks to its customers' 3D NAND investments. That more than offset softer DRAM and foundry-related chip equipment demand. On the call, Applied suggested NAND orders will slow a bit in the second half of FY16, but remain strong overall. Foundry demand is expected to grow somewhat this year, with Applied gaining share. Industry wafer fab equipment demand is expected to be flat to slightly up.
- B. Riley has upgraded Applied to Buy, and several firms have hiked their targets. Cowen's Tim Arcuri thinks $3 in annual EPS is now possible. Credit Suisse's Farhan Ahmad: "AMAT is clearly outgrowing peers this year, driven by favourable mix shift within WFE (NAND/Foundry increasing, DRAM declining) and strong growth in Display (China/OLED investments)."
Wed, Feb. 3, 3:05 PM
- Kulicke & Soffa (KLIC +14.4%) has surged above $11 after beating FQ1 estimates and guiding for FQ2 revenue of $130M-$140M, above a $129.1M consensus.
- Fellow chip equipment maker Axcelis (ACLS -9.1%) is off sharply after providing in-line Q1 guidance - revenue in the "mid-$60 million range" and EPS of $0.00-$0.01 vs. a consensus of $65.8M and $0.00 - to go with a Q4 sales beat and in-line EPS.
- Kulicke CEO Jonathan Chou offered upbeat Q1 commentary: "Stabilizing inventory levels throughout the industry combined with our improved short-term guidance support our view of a recovering market environment. This improving external condition along with our ongoing focus on cost efficiency, prudent capital deployment, targeted development and the initial acceptance of our thermo-compression tool collectively demonstrate our comprehensive effort and execution."
- On its earnings call (transcript), Axcelis said it plans to seek shareholder approval for a reverse split at its May annual meeting. CEO Mary Puma: "A one-for-four reverse split would bring our share count in line with our peer group. We expect the stock split to ultimately result in an increase in our institutional shareholder base as well as provide final resolution in our earnings-per-share."
- Larger equipment makers such as Lam Research and ASML have indicated industry demand will grow strongly in Q2 following a soft Q1. Intel and TSMC plan to increase capex in 2016 (with Intel's growth coming off depressed levels); Samsung (an Axcelis client) is expected to cut capex due to lower DRAM-related spending. Axcelis received several earnings call question about memory spending.
- Kulicke & Soffa: FQ1 results, earnings release
- Axcelis: Q4 results, earnings release
Nov. 17, 2015, 11:28 AM
- Though Kulicke & Soffa's (NASDAQ:KLIC) FQ4 revenue of $119.2M was above both consensus and the $100M-$110M guidance range provided in its Sep. 9 warning, FQ1 guidance is for revenue of $90M-$100M, below a $103.5M consensus. Meanwhile, order backlog fell 34% Y/Y to $52.5M.
- Kulicke notes it ended FY15 in a "challenging market environment" - various chip equipment makers have been hurt by Intel and TSMC's multiple capex budget cuts. The company adds it "drove further improvements to our operating model as well as refinements to our development initiatives which reduces our break-even point and further aligns our R&D efforts with market opportunities expected to drive the most meaningful and long-term shareholder returns."
- $1.9M in restructuring charges were recorded in FQ4. Excluding the charges, GAAP operating expenses were down fractionally Y/Y to $54.7M. That helped keep EPS positive in the face of a 38% Y/Y revenue drop, as did buybacks: 6.4M shares (over 8% of outstanding shares) were repurchased as of the end of FQ4, up from 3.8M at the end of FQ3. Also: Gross margin rose 180 bps Q/Q and 150 bps Y/Y to 48.9%.
- Kulicke ended FQ4 with $498.6M in cash (equal to 68% of its current market cap), and no debt.
- FQ4 results, PR
Oct. 21, 2015, 11:33 AM
- Up yesterday in response to Intel's flash manufacturing plans, chip equipment makers are higher today after Lam Research (LRCX +5.6%) announced it's buying KLA-Tencor (KLAC +22.5%) for $10.6B, with the goal of creating an industry giant on par with Applied Materials (AMAT +1%).
- In addition to Lam, KLA, and Applied, gainers include ASML (ASML +2.3%), Kulicke & Soffa (KLIC +2.9%), Teradyne (TER +4.6%), Mattson (MTSN +2.6%), and Xcerra (XCRA +2.3%). Ahead of the deal announcement, Tokyo Electron (OTCPK:TOELF) rose 4% in Tokyo, aided by the Intel news and a rally in Japanese equities.
- Lam/KLA assert the deal combines "Lam's best-in-class capabilities in deposition, etch, and clean [equipment] with KLA-Tencor's leadership in inspection and metrology." Gartner estimates Lam and KLA respectively had 9.4% and 6.4% of the 2013 chip equipment market. Applied (competes with both KLA and Lam) had 16.2%, ASML (dominant in lithography) 15.7%, and Tokyo 9.1%.
- Lam is paying the equivalent of $32/share in cash and 0.5 shares (current value of $37) for each KLA share. It plans to finance the deal with $1.9B in cash on hand from both companies, and $3.9B in debt. KLA shareholders can elect to be paid solely in cash, solely in stock, or through a mixture of cash and stock.
- The deal is expected to close in mid-2016. Lam CEO Martin Anstice will run the combined firm.
Oct. 14, 2015, 3:10 PM
- Though still well below its May/June highs, the Philadelphia Semi Index (SOXX +2.9%) has reached its highest levels since August following calendar Q3 results from Intel, Linear Technology, and ASML, and reports SanDisk and Fairchild are in buyout talks with potential suitors (respectively Micron/Western Digital and ON Semi/Infineon). The Nasdaq is down slightly.
- Intel (up 1.5%) beat Q3 estimates and provided in-line Q4 guidance. ASP strength and signs of stabilizing PC demand are overshadowing a full-year guidance cut for Intel's server CPU division, Linear (up 4.6%) posted mixed FQ1 results and issued above-consensus FQ2 guidance.
- Lithography equipment giant ASML (ASML -0.4%) beat Q3 EPS estimates and posted nearly in-line sales, but also guided for Q4 revenue of €1.4B ($1.61B), below a $1.77B consensus. Soft demand from foundry clients is blamed. Credit Suisse and Cowen argue ASML is hurt by a lack of exposure to the 3D NAND flash ramp.
- Aside from Linear and companies associated with the SanDisk/Fairchild reports, chipmakers seeing big gains include NXP (NXPI +4.6%), Freescale (FSL +3.6%), Himax (HIMX +4.2%), Qorvo (QRVO +4.9%), Cypress (CY +6.9%), AppliedMicro (AMCC +4.9%), and Linear/Fairchild peers Semtech (SMTC +4.7%), MangaChip (MX +4.6%), Diodes (DIOD +4%), and Power Integrations (POWI +4.2%). Chip packaging/testing firms ChipMOS (IMOS +3.8%) and Amkor (AMKR +5.9%) are also rallying.
- With much already priced in, chip equipment makers are also doing well, in spite of ASML's guidance, a fresh $400M cut to Intel's 2015 capex budget (to $7.3B), and a Gartner forecast for global wafer fab equipment spend to drop 0.5% in 2015 and 2.5% in 2016 before returning to growth.
- Chip equipment gainers include Lam Research (LRCX +3.6%), KLA-Tencor (KLAC +1.6%), Kulicke & Soffa (KLIC +3.3%), and Teradyne (TER +1.9%). Possibly helping: Intel stated on its earnings call its capex will rise in 2016 from 2015's depressed levels.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Sep. 9, 2015, 9:13 AM
- Kulicke & Soffa (NASDAQ:KLIC) now expects FQ4 (calendar Q3) revenue of $100M-$110M, well below prior guidance of $135M-$145M and a $140M consensus.
- The chip bonder equipment maker blames high semi inventory levels and low capacity utilization rates. "The Company believes this softer industry environment is largely driven by reduced demand within consumer and communication segments such as PCs, tablets and smartphones. This lower end market demand is anticipated to limit near-term semiconductor unit growth and decrease the industry's immediate need for incremental production equipment."
- Kulicke still expects to recognize a $20M tax benefit in FQ4, and to continue making buybacks. It has "initiated measures to address the current market situation, including execution of near-term operational improvements."
- Shares have fallen to $9.79 premarket. Kulicke's warning follows a string of capex budget cuts from Intel, as well as one from TSMC.
Aug. 4, 2015, 9:46 AM
- In addition to missing FQ3 estimates, Kulicke & Soffa (KLIC -0.6%) is guiding for FQ4 revenue of $135M-$145M, below a $187.9M consensus. However, expectations were low: Various chipmakers and chip packaging/testing firms have provided soft guidance, and Intel recently cut its 2015 capex budget by another $1B.
- CEO Bruno Guilmart: "The lower level of guidance largely stems from higher inventory levels throughout the semiconductor value chain and expectations for muted semiconductor unit growth ... Our exposure to new market opportunities combined with a relentless focus on operational efficiency are anticipated to drive fundamental business improvements and further enhance our ability to perform throughout the cycle."
- Boosting FQ3 EPS: Kulicke, pressured in the past by Lemelson Capital to return capital, repurchased 3.8M shares (5% of outstanding shares) during the quarter. Kulicke still ended FQ3 with $475.9M in cash (equal to 62% of its market cap), and no debt.
- Gross margin fell 10 bps Q/Q and Y/Y to 47.1%. R&D/SG&A spend rose 12% Y/Y to $58.5M.
- FQ3 results, PR
Jul. 16, 2015, 12:40 PM
- Applied Materials (AMAT -3.6%), ASML (ASML -4.9%), Lam Research (LRCX -4.2%), KLA-Tencor (KLAC -4.4%), Ultratech (UTEK -4.8%), Rudolph (RTEC -3.1%), Mattson (MTSN -2.4%), Advantest (ATE -2.6%), Teradyne (TER -0.9%), and Kulicke & Soffa (KLIC -1.2%) are lower (in spite of a 1.1% Nasdaq gain) after Intel cut its capex budget for the third time this year, this time by $1B to $7.7B (+/- $500M). The chip giant spent $10.1B on capex in 2014, and $10.7B-$11B in 2011-2013.
- Also: Intel disclosed it now expects to bring its first 10nm CPUs to market in 2H17, breaking with its historical 2-year manufacturing process upgrade pace and leading some to wonder if Moore's Law is proving harder to maintain. Intel's first 14nm CPUs (based on the Broadwell architecture) arrived last September.
- Separately, TSMC (cut its capex budget in April) provided cautious remarks about global chip demand. The world's biggest foundry expects 3% 2015 chip industry growth and 6%-10% foundry market growth.
- The selloff comes shortly after Applied and Lam provided aggressive 3-year EPS growth targets (I, II) at investor meetings held during the chip industry's Semicon West conference. ASML rallied yesterday following a Q2 beat and positive 2H15 outlook.
May 5, 2015, 9:10 PM
- Though Kulicke & Soffa (NASDAQ:KLIC) beat FQ2 revenue estimates today (while missing on EPS), the company has guided for FQ3 revenue of $160M-$170M, below a $197.2M consensus. The outlook follows capex budget cuts from Intel and TSMC.
- When asked on the CC (transcript) about the guidance, CEO Bruno Guilmart noted broader industry weakness, and also suggested the smaller pin counts enabled by newer chip packaging technologies could be affecting orders for Kulicke's ball bonders. He argued the packaging needs of chips used in IoT devices will drive future growth.
- Weighing on FQ2 EPS: Gross margin fell 370 bps Q/Q and 330 bps Y/Y to 47.2%. Also: The tax rate was 20.1%, above Kulicke's historical guidance range. CFO Jonathan Chau attributed this to several factors, while adding the company expects its long-term effective tax rate to be around 15%.
- Chau mentioned $10M has been spent on buybacks via Kulicke's $100M buyback program. Meanwhile, Guilmart indicated Dutch chip equipment maker Assembleon (recently acquired) is posting ~$20M/quarter in sales, with a weak euro acting as a headwind.
- Shares fell 13.2% in regular trading to $13.53.
- FQ2 results, PR
Apr. 14, 2015, 5:23 PM
- Intel has used its Q1 report to cut its 2015 capex budget by $1.3B to $8.7B (+/- $500M). The midpoint of the guidance range implies a 14% drop from a 2014 level of $10.1B, which itself was below 2011-2013 levels of $10.7B-$11B.
- Several chip equipment makers are lower AH in response. Applied Materials (NASDAQ:AMAT) -1.4%. KLA-Tencor (NASDAQ:KLAC) -1.5%. Lam Research (NASDAQ:LRCX) -1.4%. Kulicke & Soffa (NASDAQ:KLIC) -0.8%.
- In January, TSMC set an aggressive 2015 capex budget of $11.5B-$12B; Samsung is also expected to spend heavily this year. Between them, Intel, TSMC, and Samsung account for roughly half of all chip equipment capex.
Mar. 26, 2015, 10:50 AM
- The Philadelphia Semi Index (SOXX -1.8%) is now down 6% over the last two days. Today's losses come after NAND flash giant SanDisk issued a Q1 warning and withdrew its full-year guidance - price pressure, soft enterprise sales, and delayed product qualifications were all blamed.
- Meanwhile, some are partly blaming yesterday's big selloff on cautious remarks from TSMC (has an estimated ~50% global foundry share) at a Credit Suisse conference. CS analyst Randy Abrams reports TSMC (NYSE:TSM) has observed "a slowdown in the past 4-5 weeks due to US$ strength impacting European and emerging market purchasing power," and that inventories "will be a few days above seasonal exiting 1Q15." Pac Crest downgraded TSMC two weeks ago on inventory concerns.
- Following an Asian trip, Susquehanna's Chris Caso has argued there isn't too much to be alarmed about, though he admits forex could be an issue. "There’s mixed signals here and there. We weren’t picking up anything that was tremendously different across the supply chain. PCs were the weakest area. That’s really not a surprise."
- RF chipmakers Skyworks (SWKS -4.6%) and Qorvo (QRVO -2.1%), among 2014's best performers, are again selling off; peer Avago is off only slightly. Also seeing further profit-taking are Ambarella (AMBA -3%), NXP (NXPI -3.6%), Freescale (FSL -2.8%), Cavium (CAVM -3.2%), and STMicroelectronics (STM -4.5%).
- Among equipment makers, Axcelis (ACLS -2.9%), Aixtron (AIXG -3.6%), Veeco (VECO -3%), and Kulicke & Soffa (KLIC -2.5%) are declining. A selloff in European equities could be affecting Aixtron, NXP/Freescale, and STMicro.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
- Update: Credit Suisse, Goldman, and Deutsche have each offered thoughts on the chip selloff.
Jan. 28, 2015, 11:07 AM
- In addition to beating FQ1 estimates, Kulicke & Soffa (NASDAQ:KLIC) has guided for FQ2 revenue of $125M-$145M, above a $128.4M consensus at the midpoint.
- Ball bonder equipment sales fell 54.9% Q/Q, and wedge bonder sales 9.6%. Quarter-ending backlog was $60.5M vs. $79.1M at the end of FQ4 and $46M a year earlier.
- Gross margin rose 350 bps Q/Q and 240 bps YY to 50.9%, and operating expenses rose 11% Y/Y to $45M.
- Kulicke ended FQ1 with $633.4M in cash/short-term investments. That's equal to 57% of its current market cap. Shares have risen to their highest levels in more than a decade.
- FQ1 results, PR
Jan. 8, 2015, 4:18 PM
- Hit hard on Tuesday amid a market rout, chip stocks have more than made up for it today: The Philadelphia Semi Index (SOXX +3%) handily exceeded the Nasdaq's 1.8% gain. The index posted a 1% gain yesterday.
- Micron (MU +4.9%) has been one of the standouts, more than recouping yesterday's post-earnings losses. Ditto Freescale (FSL +9.2%), which benefited from a Deutsche target hike, and Marvell, which got a lift from an MKM note. Others: NVDA +3.8%. NXPI +4.7%. AVGO +5%. SWKS +4.5%. CY +6.1%. CODE +5.9%. CAVM +5.2%. SWKS +4.5%. SLAB +4.5%. KLIC +3.8%. SMTC +3.6%. ATML +3.7%. FCS +4.2%. TSEM +4.2%.
- As is their custom, both chipmakers and their clients have been unveiling plenty of new products at CES.
- ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Oct. 10, 2014, 9:59 AM
- Microchip's (MCHP -12.5%) calendar Q3 warning, which was accompanied by a declaration that it believes "another industry correction has begun and that this correction will be seen more broadly across the industry in the near future," is taking a heavy toll on chip stocks (SOXX -5.5%).
- Intel (INTC -4.2%) and many other chipmakers have joined the several firms that sold off AH yesterday in going in the same direction as Microchip: MU -5.8%. FSL -8.5%. BRCM -3.6%. SWKS -7.5%. RFMD -6.2%. XLNX -4.9%. MXIM -5%. AMBA -5.5%. IDTI -6.7%. CAVM -7.4%. AVGO -10.2%. SMTC -4.3%. SYNA -4.1%. POWI -6.9%.
- Chip equipment makers are also getting hit: AMAT -3.5%. KLAC -3.3%. LRCX -2.3%. UTEK -2.5%. KLIC -2%.
- As Microchip noted in yesterday's warning, the company's very diversified customer base, together with its recognition of distributor revenue on a customer sell-through basis rather than a distributor sell-in basis, often allow it to see industry changes before peers.
- The microcontroller vendor added its warning was driven by a September decline in sales to Chinese clients, and observed it has typically "returned to sequential revenue growth after two quarters" during past downturns.
- Chip stocks have had a good run over the last 12 months, aided by healthy mobile demand and the industry's consolidation wave.
Jun. 4, 2014, 10:37 AM
- B. Riley (Buy, $16.50 PT) is a fan of Kulicke & Soffa's (KLIC +2.9%) valuation, and thinks earnings growth, capital returns, and advanced chip packaging improvements can act as catalysts.
- Shares are near their 52-week high of $14.85. They took off in April due to Kulicke's strong FQ3 guidance, and prior to that on activist investor Lemelson Capital's call for a massive buyback.
- Kulicke had $596.3M in cash/investments at the end of FQ2 (compares with a current market cap of $1.1B), and no debt.
Apr. 29, 2014, 11:20 AM
- Though its FQ2 results were ho-hum, Kulicke & Soffa (KLIC +9.8%) is guiding for FQ3 revenue of $165M-$175M, well above a $154.4M consensus.
- Mainstay ball bonder equipment sales rose 80.9% Q/Q, and copper-capable hardware accounted for 69.7% of them. Wedge bonder equipment sales fell 32.7% Q/Q. Gross margin rose 200 bps Q/Q and 450 bps Y/Y to 50.5%.
- The chip equipment maker's shares are making new 52-week highs. They jumped last week after activist investor Lemelson Capital disclosed a position and called for a major buyback.
- Kulicke ended FQ2 with $596.3M in cash/investments (equal to 55% of its current market cap), and no debt.
- FQ2 results, PR
Kulicke & Soffa Industries, Inc. designs, manufactures and sells capital equipment and expendable tools as well as services, maintains, repairs and upgrades equipment, all used to assemble semiconductor devices It operates through two segments: Equipment and Expendable Tools. The Equipment... More
Industry: Semiconductor Equipment & Materials
Country: United States
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