LASR Stock

LASR Stock Could Surge as Chip Sector Comes Back

The world is currently facing a significant shortage in semiconductor chips across nearly all segments, from low to advanced technology.

 

But the situation will improve as companies ramp up their chip foundries, a move that could benefit nLIGHT Inc (NASDAQ:LASR). The company is a developer of advanced lasers used in semiconductor, industrial, and optical fiber applications. The lasers help chipmakers develop better products.

nLIGHT stock debuted at $16.00 in April 2018, surging higher than $40.00 by July 2018, but the subsequent years have been indecisive.

LASR stock traded as low as $14.28 in May 2020, prior to staging a strong rally to a record $46.45 in February 2021.

But similar to its performance in the last few years, nLIGHT stock failed to gain any upside sustainability. It has declined to below $30.00 and below its key 50-day moving average, and it’s hovering around its 200-day moving average.

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At its current price, I like the long-term prospects for LASR stock, especially given the expected strong growth in the chip industry and the company’s improving fundamentals.

Improving Fundamentals Bode Well for nLIGHT Stock

A look at nLIGHT Inc’s five-year revenue picture shows the company more than doubling its revenues from 2016 to a record in 2020. The compound annual growth rate (CAGR) in that period was an impressive 21.8%.

The company’s revenues grew in the strong double-digits in three of the last four years, including in 2020, during the pandemic.

Fiscal Year Revenues (Millions) Growth
2016 $101.3 N/A
2017 $138.6 36.8%
2018 $191.4 38.1%
2019 $176.6 -7.7%
2020 $232.8 26.1%

(Source: “nLIGHT Inc.,” MarketWatch, last accessed April 30, 2021.)

The company’s outlook looks positive for the next two years. nLIGHT is expected to increase its revenues by 20.1% to $267.5 million this year and by 15.9% to $309.9 million in 2022. (Source: “nLIGHT, Inc. (LASR),” Yahoo! Finance, last accessed April 30, 2021.)

The company produced earnings before interest, taxes, depreciation, and amortization (EBITDA) income in three of the last four years.

Fiscal Year EBITDA Growth
2016 -$1.2 Million N/A
2017 $17.7 Million 1,530%
2018 $25.4 Million 43.1%
2019 $155,000 -99.4%
2020 -$4.4 Million -2,904.5%

(Source: MarketWatch, op. cit.)

nLIGHT Inc hasn’t been able to deliver consistent profits based on generally accepted accounting principles (GAAP) earnings per share (EPS).

Fiscal Year GAAP Diluted EPS Growth
2016 -$0.42 N/A
2017 $0.00 100.0%
2018 $0.32 3,200%
2019 -$0.35 -209.2%
2020 -$0.55 -57.2%

(Source: MarketWatch, op. cit.)

On an adjusted basis, nLIGHT has managed to produce profits, and the estimates have been on the rise.

The company reported an adjusted $0.17 per diluted share in 2020. The consensus estimate calls for nLIGHT Inc to ramp this up to $0.41 in 2021. For 2022, LASR is expected to report $0.68 per diluted share. (Source: Yahoo! Finance, op. cit.)

The company’s earnings in 2020 showed four quarters straight of beats, ranging from 50% in the first quarter to 1,100% in the third quarter.

nLIGHT Inc reported positive free cash flow (FCF) in 2016 before reporting four consecutive years of negative FCF. Watch for this to improve.

Fiscal Year FCF (Millions) Growth
2016 $1.9 N/A
2017 -$2.1 -209.3%
2018 -$8.4 -304.4%
2019 -$17.9 -113.3%
2020 -$7.6 57.7%

(Source: MarketWatch, op. cit.)

Meanwhile, nLIGHT Inc’s balance sheet is strong, with $102.3 million in cash and $13.1 million in debt. This will allow time for nLIGHT to execute its strategy. (Source: Yahoo! Finance, op. cit.)

Analyst Take

Institutions and insiders have been buying LASR stock, which is a good sign. About 219 institutions hold an 87.3% stake in the outstanding shares. Moreover, insiders added a net 170,586 shares of nLIGHT stock over the last six months. (Source: Yahoo! Finance, op. cit.)

Given its current share-price weakness, nLIGHT Inc could eventually take off as more companies ramp up chip production.

 

Originally Posted by Profit Confidential