Shares of Aehr test systems (NASDAQ: AEHR) rose 18% as of 1:43 PM ET on Friday.
The maker of wafer-level test and burn-in equipment yesterday reported earnings for the August quarter, beating expectations. But more important than the reported results was management’s commentary that Aehr is penetrating new markets, especially artificial intelligence (AI) accelerators.
Aehr is a small company with big opportunities
Last night, Aehr reported earnings for the fiscal first quarter ending in August. Although revenue fell 36.5% to $13.1 million, this actually exceeded analyst expectations, as did non-GAAP (adjusted) earnings per share (EPS) of $0.07, which was well above expectations of $0 .01 came out.
Aehr’s devices test semiconductors by subjecting them to high voltages on the wafer, simulating harsh conditions they would endure if deployed in the real world.
Wafer-level testing is a somewhat new endeavor, but makes sense for many new types of power-hungry chips. These include silicon carbide (SiC) chips for electric vehicles and infrastructure, Aehr’s core market. The slowdown in electric vehicle sales over the past year has reduced investments in Aehr’s systems.
However, during the post-earnings conference call, CEO Gayn Erickson noted that there had been “stabilization and increasingly positive discussions” with the company’s SiC customers in recent days. Not only that, but Aehr also received its first orders to test AI accelerators as well. This is an exciting development as AI accelerators are expected to achieve tremendous growth in the coming years. Considering that they consume a lot of heat, it’s fair to say that AI chips would benefit from burn-in testing at the wafer level. Additionally, Erickson noted that the company’s first Gallium Nitride (GaN) customer would move from testing to full production in the coming year.
Aehr’s shares appear expensive, but earnings could skyrocket
For the fiscal year ending next May, management expects “at least” $70 million in revenue and pre-tax profit of “at least” 10% of sales. At first glance, that doesn’t seem to justify a $450 million market cap after today’s rally.
However, the current results are essentially the low point of a bad EV downcycle. As that market recovers, new applications in GaN and AI accelerators could drive significant revenue and profit growth. So Aehr is a somewhat speculative piece that could disappoint, but could also turn into a multibagger.
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Billy Duberstein and/or his clients hold positions at Aehr Test Systems. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Aehr Test Systems Are Up 18% Today was originally published by The Motley Fool
