On Wednesday, a Craig-Hallum analyst revised the stock rating for Aehr Test Systems (NASDAQ:AEHR), moving it from Hold to Buy and setting a price target of $25.00. The upgrade reflects a positive outlook on the company's diversification of its opportunity set beyond its silicon carbide (SiC) expansion narrative.
The analyst noted that although SiC growth may be challenged in the near term due to slower-than-expected electric vehicle (EV) adoption rates this year, the market for SiC devices is projected to pick up pace again starting in 2025. Industry research by Yole Intelligence indicates that the SiC device market could see a compound annual growth rate (CAGR) of 25% from 2023 to 2030, expanding from $2.7 billion to over $10 billion by the decade's end.
Aehr Test Systems has been actively engaging with five major SiC customers, with Onsemi being the most significant among them. The company is also anticipating to broaden its customer base this fiscal year, including generating revenue from new SiC customers in China.
Setting a new price target for Aehr Test Systems stock, the analyst's outlook suggests confidence in the company's potential for growth and expansion in the coming years. The updated target represents a significant increase in value, indicating an optimistic view of Aehr Test's future market performance.
In other recent news, Aehr Test Systems has made significant strides in the semiconductor sector. The company announced a definitive agreement to purchase Incal Technology, Inc. for $21 million. This acquisition will integrate Incal's high-power test solutions into Aehr's product line, targeting the artificial intelligence semiconductor market. The acquisition is set to close within the next 60 days.
In addition to the acquisition, Aehr Test Systems reported strong fiscal 2024 earnings. The company announced a fourth-quarter revenue of about $16.6 million and a GAAP net income of roughly $23.8 million. For the full fiscal year 2024, Aehr reported revenues of around $66.2 million and a GAAP net income of nearly $33.1 million, surpassing both the company's previous guidance and analyst consensus.
Despite facing a slowdown in electric vehicle demand impacting product orders, Aehr achieved record annual revenue. The company remains optimistic about its long-term prospects, citing opportunities in markets like silicon carbide, gallium nitride, silicon photonics, and memory semiconductors.
InvestingPro Insights
In light of the recent analyst upgrade for Aehr Test Systems, investors may find additional context in the latest metrics and insights from InvestingPro. With a market capitalization of $486.92M and a P/E ratio of 15.04, Aehr Test Systems appears to be valued by the market for its current profitability. However, the adjusted P/E ratio for the last twelve months as of Q3 2024 stands at 31.61, suggesting a higher valuation when considering near-term earnings growth. The company's revenue growth for the same period is robust at 14.14%, although quarterly revenue growth has seen a significant dip of -56.04%.
InvestingPro Tips highlight that Aehr Test Systems holds more cash than debt on its balance sheet and that its liquid assets exceed short-term obligations, providing a degree of financial stability. The stock has experienced a significant return over the last week with a 9.42% price total return, and over the last three months, it has soared, showing a 51.03% price total return. These tips underscore the company's recent strong market performance, which may interest potential investors.
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