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In the trailing 12 months, shares of AOSL and CRUS have rallied 47.7% and 23.5%, respectively, while NVTS shares have plunged 49.8%. The industry has appreciated 56.8% in the past year. With this outperformance, investors may be wondering whether to buy, hold or sell NVMI stock.
Nova’s financial performance underscores its solid position in the semiconductor market. In the third quarter of 2024, the company reported record revenues of $179 million, up 39% year over year, and non-GAAP earnings per share (EPS) of $1.74, up 41% from the year-ago quarter. Both top and bottom lines surpassed the respective Zacks Consensus Estimates as well.
Nova’s outperformance is driven by its leadership in critical technologies, including optical and chemical metrology, which are essential for advanced semiconductor manufacturing processes. The company’s innovative offerings, such as the VeraFlex IV platform and PRISM 2, are well-aligned with the industry’s transition to advanced nodes, artificial intelligence (AI) workloads, and hybrid bonding, ensuring strong demand for its solutions.
Analysts are optimistic about Nova’s growth prospects. The Zacks Consensus Estimate for 2025 revenues and earnings depict a year-over-year increase of 19.5% and 12.9%, respectively. NVMI has surpassed the consensus mark for earnings in the trailing four quarters, with an average surprise of 10.1%.
Nova’s Strategic Positioning in High-Growth Markets
Nova’s exposure to cutting-edge trends like gate-all-around (GAA) transistors, advanced packaging and backside power delivery positions it at the forefront of semiconductor innovation. The adoption of GAA technology, expected to increase process complexity by 30%, presents a lucrative opportunity for Nova. The company projects $500 million in cumulative revenues from GAA processes by 2026, reinforcing its long-term growth prospects.
NVMI is capitalizing on the semiconductor industry’s structural growth, driven by AI, high-performance computing, and advanced memory requirements. Its advanced packaging solutions, critical for AI and high-bandwidth memory, are seeing accelerated adoption as customers upgrade their manufacturing capabilities to meet increasing demand.
The company’s strong research & development (R&D) investments further enhance its technological edge. Nova’s leadership in both dimensional and chemical metrology ensures its relevance as manufacturing complexity increases, making it a preferred partner for top-tier semiconductor manufacturers.
Short-Term Challenges for Nova
Despite the strengths, Nova grappled with a few challenges. The company’s reliance on the Chinese market, while previously a strength, has become a growing risk due to geopolitical tensions between the United States and China. China contributed about 36% of the company’s total sales in 2023. However, escalating trade tensions and potential export restrictions on semiconductor technologies to China could severely hinder Nova’s ability to maintain these revenues.
The global semiconductor supply chain remains highly susceptible to geopolitical disruptions, and Nova's heavy exposure to China amplifies this risk. Investors should weigh this uncertainty heavily when considering whether to hold or sell the stock, as any future restrictions could be a major drag on Nova's revenues.
Moreover, NVMI's non-GAAP operating expenses are expected to reach $50 million in the fourth quarter, driven by ongoing investments in R&D. This reflects a 44.5% increase from the year-ago quarter and a 5.3% rise from the previous quarter. Rising costs, paired with margin pressures, may impact the company's bottom line, making it harder to sustain profitability levels in the future.
Image: Bigstock
Nova Surges 72% in a Year: Should You Buy, Sell or Hold the Stock?
Nova Ltd. (NVMI - Free Report) shares have soared 71.6% over the past year, outperforming the broader Zacks Computer and Technology sector’s return of 27.8%. Over the same time frame, it also outperformed the Electronics - Semiconductors industry and its peers, including Alpha Omega and Semiconductor (AOSL - Free Report) , Cirrus Logic (CRUS - Free Report) and Navitas Semiconductor (NVTS - Free Report) .
In the trailing 12 months, shares of AOSL and CRUS have rallied 47.7% and 23.5%, respectively, while NVTS shares have plunged 49.8%. The industry has appreciated 56.8% in the past year. With this outperformance, investors may be wondering whether to buy, hold or sell NVMI stock.
Nova Ltd. Price and Consensus
Nova Ltd. price-consensus-chart | Nova Ltd. Quote
Nova’s Robust Financial and Market Performance
Nova’s financial performance underscores its solid position in the semiconductor market. In the third quarter of 2024, the company reported record revenues of $179 million, up 39% year over year, and non-GAAP earnings per share (EPS) of $1.74, up 41% from the year-ago quarter. Both top and bottom lines surpassed the respective Zacks Consensus Estimates as well.
Nova’s outperformance is driven by its leadership in critical technologies, including optical and chemical metrology, which are essential for advanced semiconductor manufacturing processes. The company’s innovative offerings, such as the VeraFlex IV platform and PRISM 2, are well-aligned with the industry’s transition to advanced nodes, artificial intelligence (AI) workloads, and hybrid bonding, ensuring strong demand for its solutions.
Analysts are optimistic about Nova’s growth prospects. The Zacks Consensus Estimate for 2025 revenues and earnings depict a year-over-year increase of 19.5% and 12.9%, respectively. NVMI has surpassed the consensus mark for earnings in the trailing four quarters, with an average surprise of 10.1%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Nova’s Strategic Positioning in High-Growth Markets
Nova’s exposure to cutting-edge trends like gate-all-around (GAA) transistors, advanced packaging and backside power delivery positions it at the forefront of semiconductor innovation. The adoption of GAA technology, expected to increase process complexity by 30%, presents a lucrative opportunity for Nova. The company projects $500 million in cumulative revenues from GAA processes by 2026, reinforcing its long-term growth prospects.
NVMI is capitalizing on the semiconductor industry’s structural growth, driven by AI, high-performance computing, and advanced memory requirements. Its advanced packaging solutions, critical for AI and high-bandwidth memory, are seeing accelerated adoption as customers upgrade their manufacturing capabilities to meet increasing demand.
The company’s strong research & development (R&D) investments further enhance its technological edge. Nova’s leadership in both dimensional and chemical metrology ensures its relevance as manufacturing complexity increases, making it a preferred partner for top-tier semiconductor manufacturers.
Short-Term Challenges for Nova
Despite the strengths, Nova grappled with a few challenges. The company’s reliance on the Chinese market, while previously a strength, has become a growing risk due to geopolitical tensions between the United States and China. China contributed about 36% of the company’s total sales in 2023. However, escalating trade tensions and potential export restrictions on semiconductor technologies to China could severely hinder Nova’s ability to maintain these revenues.
The global semiconductor supply chain remains highly susceptible to geopolitical disruptions, and Nova's heavy exposure to China amplifies this risk. Investors should weigh this uncertainty heavily when considering whether to hold or sell the stock, as any future restrictions could be a major drag on Nova's revenues.
Moreover, NVMI's non-GAAP operating expenses are expected to reach $50 million in the fourth quarter, driven by ongoing investments in R&D. This reflects a 44.5% increase from the year-ago quarter and a 5.3% rise from the previous quarter. Rising costs, paired with margin pressures, may impact the company's bottom line, making it harder to sustain profitability levels in the future.
Zacks Rank
NVMI currently carries a Zacks Rank #3 (Hold), implying that existing investors should hold the stock while new buyers should wait for a better entry point into the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.