IPG Photonics Hit Hard By Ongoing Share Loss And Global Tensions

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Stephen Simpson
18.32K Followers

Summary

  • IPG Photonics posted disappointing results for Q4'21 with pronounced weakness in its Chinese high-power laser business and guided to a mid-single-digit growth rate and a "reset" for FY'22.
  • Competitive inroads from Chinese fiber laser companies have been an issue for some time, and management will have to work to build new high-value growth markets outside of China.
  • IPG has stayed at the forefront of fiber laser technology for years, but finding new, large growth markets has proven more challenging and inconsistent.
  • Geopolitical turbulence is a credible risk, with IPG having a substantial physical presence (manufacturing, R&D, and management) in Russia.
  • Mid-single-digit revenue growth, high single-digit FCF growth, and mid-to-high 20%s operating margins can support a higher share price, but this is a contrarian call.

The fiber laser cutting machine cutting machine cut the metal plate.

Phuchit/iStock via Getty Images

Going positive on IPG Photonics (NASDAQ:IPGP) back in August has turned out to be a bad call. Not only has geopolitical tension with Russia created worries about how IPG Photonics could be impacted by potential

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Stephen Simpson profile picture
18.32K Followers
Stephen Simpson is a freelance financial writer and investor. Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds); now a semi-retired raccoon rancher. That last part isn't entirely true. Probably.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

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