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Bull of the Day: ACM Research (ACMR)

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ACM Research (ACMR - Free Report) is a Zacks Rank #1 (Strong Buy) that develops, manufactures, and sells single-wafer wet cleaning equipment for enhancing the manufacturing process and yield for integrated chips.

The demand for artificial intelligence and the chips that fuel AI have brought demand for ACM’s tools. This has helped the company post a long streak of earnings beats, including a 330% EPS beat last quarter.

The stock has pulled back on the recent tech sell-off so the question for investors is if the current dip presents an opportunity.

About the Company

ACM Research is headquartered in Fremont, CA, and employs over 1,500.

The stock has Zacks Style Scores of “D” in Growth, Momentum, and Value.

The company was founded in 1998, has a market cap of $1.4 billion, and a Forward PE of 15. ACMR pays no dividend.

Q4 Earnings Beat

On February 28th, ACMR reported a 330% EPS beat and saw revenues up 56% y/y. The company affirmed its FY24 outlook range of $650-725M versus the $707M expected.

Management cited the strength of ACM’s multi-product portfolio and its growing customer base. They added that they have captured market share and made notable strides in penetrating international markets.

The stock gapped higher and ran the next day posting a 30% gain. Investors took notice of this small semiconductor name but it has since pulled back as the next catalyst approaches.

The company will release its preliminary revenue range on April 26th before the market opens. It will then release its full results on May 8th.

That first release will likely give investors the green light to buy the stock again or erase the bull's hopes of getting back to recent highs.

Analyst Estimates

All indications are that the quarter will be solid as analysts lifted estimates since earnings.  

For the current quarter, estimates over the last 60 days have gone from $0.19 to $0.36, or 89%.

Looking longer term, the current year shows a 19% jump over that same time frame, moving from $1.36 to $1.62.

Since earnings, the stock has seen multiple upgrades and price target hikes.

ROTH MKM reiterated its Buy and lifted its target from $25 to $40.

Goldman Sach also reiterated its Buy and has a $39 target.

Benchmark has raised its target twice since earnings, first going to $35, then later to $38.

The Technicals

At its highest point, ACMR was up 70% in 2024. The recent pullback has not been nice to the bulls and the stock is now up only 25% this year.

While the upcoming earnings will likely rejuvenate the momentum or erode more gains, there are some levels to look for either way.

The $19.25 area is the 200-day MA and would be in line with former resistance in 2023. If earnings were to disappoint, this would be the area to enter for long-term players.

$22.75 is the gap fill and the 61.8% retracement from the February lows to the 2024 highs. This is a good spot to see a relief bounce and a possible support area.

If the bulls gain back momentum, a move back over the $27 area is a 50-day MA break and a bullish signal. A positive earnings report and a break above $29.50 would give the bulls a 21-day MA break and full control of the momentum.

If we get an impressive preliminary revenue guide, investors could look for the $38 area down the road. 

Bottom Line

More investors are looking for smaller stocks to enter the AI/semi-boom. ACMR is a perfect place to be, but a lot of the short-term price movement will be based on upcoming earnings.

Due to the massive demand, the company likely beats once more, but investors need to decide whether to dip their toes in before the preliminary guide or wait for more certainty.

Either way, this is a stock to watch over the next few weeks and if the company holds the earnings momentum, investors should expect new highs before the end of 2024.

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