We came across a bullish thesis on Axcelis Technologies, Inc. (ACLS) on Mason’s Substack by Mason. In this article, we will summarize the bulls’ thesis on ACLS. ACLS Foods, Inc.'s share was trading at $100.15 as of October 9^th. ACLS’s trailing and forward P/E were 13.79 and 13.89 respectively according to Yahoo Finance.

An engineer in a lab coat examining a state-of-the-art semiconductor chip.

Axcelis Technologies is a prominent capital equipment manufacturer within the semiconductor industry, specializing in ion implantation and other processing equipment critical for the fabrication of semiconductor chips. Established in 1978 and incorporated in Delaware in 1995, Axcelis is headquartered in Beverly, Massachusetts. The company is led by CEO Russell J. Low, with Mary G. Puma serving as Executive Chairperson after a notable 21-year tenure as CEO.

In Q2 2024, Axcelis reported revenues of $256.5 million, a slight increase from $252.4 million in Q1 2024. However, the gross margin declined by about 200 basis points to 43.8%, primarily due to weakened demand in the memory sector and general consumer uncertainty. Despite this, Axcelis projects a revenue rebound in Q4 2024, with continued momentum anticipated through the latter half of 2025.

Axcelis presents a compelling opportunity for long-term investors to benefit from its high rate of return potential over the next decade. The company holds a dominant market share in ion implantation, particularly in the growing Carbon SiC and Carbon IGBT power device segments, which are critical to the electric vehicle (EV) and alternative energy markets. As demand for electric vehicles and power capacity for AI technology increases, Axcelis is well-positioned to capitalize on these trends, driving strong revenue growth. The company's revenue base is well-diversified, supported by its substantial investments in R&D, a focus on technological advancements, and plans for global expansion. Axcelis operates in a highly specialized industry with significant barriers to entry, allowing the company to maintain and grow its market share while benefiting from economies of scale. Its aftermarket services segment, which delivers high-margin revenue, is set to expand as the installed base of devices matures, further bolstering profitability. Axcelis also benefits from a strong balance sheet, solid cash flow generation, and a management team focused on long-term growth. The leadership's technical and operational experience within the company and industry allows Axcelis to navigate technological shifts effectively and make strategic decisions for sustainable growth.

Key risks include market competition, potential macroeconomic slowdowns, and geopolitical factors. However, the company’s strengths in market positioning and its low-cost aftermarket services offer a buffer. With a target price of $160 based on a blended approach of discounted cash flow (DCF) and comparable company analysis, Axcelis offers a significant upside from its current share price of $112.53.

Axcelis Technologies, Inc. is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held ACLS at the end of the second quarter which was 25 in the previous quarter. While we acknowledge the risk and potential of ACLS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ACLS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.