Photronics a Sell to $1.50

The manufacture of photomasks is increasingly turning to in-house facilities at more mature nodes. Consolidation within the industry continues, as semiconductor manufacturing companies acquire photomask production assets. Photronics, Inc. (PLAB - Snapshot Report) is the last major independent merchant supplier.

The capital structure has considerable leverage with a debt-to-equity ratio of 41.7%, which will be lowered after the convertible bonds mature in December. Almost all of the debt is convertible subordinated notes, which if exercised, could potentially be dilutive to equity shareholders.

Photronics has strong technical development capabilities, and is experiencing growth in its 130nm and 90nm product lines. In the near-term, this growth will not outshine a maturing legacy product and soft markets. Consequently, we rate shares of PLAB a Sell. Our target is $1.50 per share.

Read the full analyst report on PLAB