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ACM Research: What Investors Should Pay Attention To In The Q1 Results

Jun. 03, 2020 9:39 AM ETACM Research, Inc. (ACMR)2 Comments
Vasily Zyryanov profile picture
Vasily Zyryanov


  • ACMR delivered on its promises and posted close to 19% quarterly revenue growth even despite the pandemic.
  • It is still exceptionally bullish on the 2020 revenue prospects, predicting sales to rise 21.0%-39.5%.
  • I was partly right on the Wuhan issues; in March, investors factored in this risk, and the share price plummeted to the 10s.
  • I remain neutral, as positives and negatives are nearly equally weighted.

On May 6, ACM Research, Inc. (NASDAQ:ACMR), a semiconductor capital equipment manufacturer, presented its first-quarter results. The figures were generally robust, especially the top line, even despite the COVID-19 pandemic that began in the Wuhan province of China where ACM's principal customers like Yangtze Memory Technologies (or YMTC) operate.

I brought the company to the attention of my readers in late-January. Back then, I pointed out the Wuhan risk was not priced in, or, put another way, the possibility that its essential customers would defer or cancel growth plans and suspend purchases of capital equipment was high. In this sense, investors' sentiment could swiftly change from reckless bullishness to outright bearishness. Among other things, ACM has a high customer concentration (three customers brought almost 74% of the 2019 revenue), and if one client suspends purchases/shipments due to lockdowns or other coronavirus-related headwinds (e.g., the semiconductor market woes), the total sales will be afflicted. If the market realized how serious risks truly were, ACMR lofty valuation (e.g., ~36.8x Forward EV/EBITDA) would evaporate abruptly. As the situation with the COVID-19 was fluid, I remained neutral.

In February and March, my prognosis materialized, as ACM share price shrunk more than 2x. But since then, a gamut of catalysts, including Q1 EPS and revenue beat, lifted the price to an all-time high. Now, I believe it is worth reassessing the stock.

Computer chip

The top line

Thankfully, despite the raging pandemic that severely hit China and then spread across the globe, ACM remained relatively unscathed. Its Q1 revenue had strong momentum and rose 18.9% YoY, thanks to robust sales of front-end processing capital equipment, while shipments, a more volatile metric, slipped to $12 million vs. $25 million in Q4 and $14 million in Q1 2019. The top-line growth could be more impressive, if not for softness in back-end wafer assembly and packaging (the company did not shed light on what

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This article was written by

Vasily Zyryanov profile picture
Vasily Zyryanov is an individual investor and writer.He uses various techniques to find both relatively underpriced equities with strong upside potential and relatively overappreciated companies that have inflated valuation for a reason.In his research, he pays much attention to the energy sector (oil & gas supermajors, mid-cap, and small-cap exploration & production companies, the oilfield services firms), while he also covers a plethora of other industries from mining and chemicals to luxury bellwethers.He firmly believes that apart from simple profit and sales analysis, a meticulous investor must assess Free Cash Flow and Return on Capital to gain deeper insights and avoid sophomoric conclusions.While he favors underappreciated and misunderstood equities, he also acknowledges that some growth stocks do deserve their premium valuation, and its an investor's primary goal to delve deeper and uncover if the market's current opinion is correct or not.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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