Market Overview

Advanced Energy Industries' Holiday Bump

Advanced Energy Industries (NASDAQ: AEIS) saw a large move in its stock price over the last few days. After trading at around the $15 mark, the holiday weekend saw it plunge towards $13. The performance of its renewables business drove its lower than expected Q2 revenue. Results were impacted by changing solar market conditions due to panel price declines, short lead-times for components, and permitting and financing delays. These trends are causing some customers to push-out purchases until panel prices stabilize, leading to the postponement of construction of their projects.

Advanced Energy Industries designs, manufactures and sells industrial power conversion products, which transforms power into various usable forms. The products enable manufacturing processes, which use thin-film deposition for various products, such as semiconductor devices, flat panel displays, solar panels and architectural glass, as well as grid-tie power conversion in the solar market.

Revenues are expected to rise 26% in 2011 and 6.6% in 2012, after more than doubling in 2010, as strong growth is anticipated in AEIS's nonsemiconductor businesses. Healthy growth is also forecasted in the semiconductor segment over the next few quarters as customers transition to more advanced technology and increase capital spending plans.

A buy opinion reflects valuation, as the shares trade below peers, and diversified endmarket exposure. Some investors believe semiconductor equipment orders will remain healthy, on greater foundry spending. However, there are concerns about increasing solar inverter supply, which could pressure prices.

A 12-month target price of $18 is based on a blend of peer-premium but below historical P/E and P/S analyses.

ACTION ITEMS:

Bullish:
Traders who believe that the glitch is temporary might want to consider the following:

  • Moving Average Convergence/Divergence indicates a Bullish Trend.
  • The 50 day Moving Average is rising
  • The 200 day Moving Average is rising

Bearish:
Traders who believe that this is the beginning of a trend may consider an alternate positions:

  • Chart pattern indicates a Weak Upward Trend.
  • Up/Down volume pattern indicates that the stock is under Accumulation.
  • Look for Support at 13.28

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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