On Friday, BofA Securities updated its outlook on Nova Measuring (NASDAQ:NVMI) Instruments (NASDAQ:NVMI) shares, increasing the price target to $220 from $190, while maintaining a Buy rating on the stock.
The adjustment follows Nova Measuring's reported sales and earnings per share (EPS) for the March quarter, which surpassed consensus estimates. The company's non-GAAP gross margin reached 61%, exceeding expectations by 192 basis points, attributed to the early delivery of high-value products in the first quarter.
Nova Measuring provided guidance for the June quarter that was 5% higher than the market anticipated, with a projected $148 million in sales at the midpoint. This reflects a 4% sequential growth, and an EPS estimate also 5% higher at $1.35.
The company's performance and outlook are now more closely aligned with that of its process control peer, KLA Corporation (KLAC), which has forecasted a 6% quarter-over-quarter increase in June quarter sales.
The demand for Nova Measuring's products is being driven by the adoption of Artificial Intelligence, which requires High Bandwidth (NASDAQ:BAND) Memory chips that use significantly more wafers than leading-edge DRAM chips. Additionally, Advanced Packaging (NYSE:PKG) applications are contributing to the demand.
The company's sales outlook remains positive through the 2025 fiscal year, with anticipated benefits from packaging, High Bandwidth Memory demand, and a memory market recovery. Growth rates are expected to surpass 16% year-over-year, exceeding the company's 2024 fiscal year estimates.
In light of these factors, BofA Securities raised its 2024 and 2025 fiscal year sales and EPS estimates by 2% and 4%, and 3% and 3%, respectively, resulting in new EPS projections of $5.46 and $6.30.
The revised price objective of $220 is based on a 34 times price-to-earnings ratio for the 2025 fiscal year, which is at the upper end of the company's historical trading range of 18 to 34 times, but is seen as justified by the anticipated near-term growth phase.
InvestingPro Insights
Following BofA Securities' optimistic outlook on Nova Measuring Instruments, InvestingPro data and tips provide additional context for investors considering NVMI's stock. With a market capitalization of $5.6 billion and a P/E ratio of 41.56, the company trades at a premium, reflecting its high growth potential. Analysts tracking NVMI have revised their earnings upwards for the upcoming period, indicating confidence in the company's financial prospects.
InvestingPro data highlights a significant return of 8.33% over the last week and an impressive 111.61% over the past year, signaling strong market performance. Moreover, NVMI's liquid assets exceed its short-term obligations, showcasing a robust financial position. These metrics, along with a fair value estimate of $203 by analysts, suggest that NVMI's stock has room for growth, aligning with BofA Securities' raised price target.
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