UPDATE: Bank of America Downgrades Advanced Energy Industries to Underperform, Reiterates $18.50 PT Following Strong Rally

In a report published Thursday, Bank of America analyst Krish Sankar downgraded the rating on Advanced Energy Industries

from Buy to Underperform, but reiterated the $18.50 price target. In the report, Sankar noted, “We are downgrading AEIS from a Buy to Underperform rating. Following a strong rally (+39% YTD), the stock has exceeded our price objective of $18.50 and we see limited upside to our street-high CY13 revenue estimate of $514M and above-consensus EPS of $1.16 (compared to Street rev/EPS of $502M/$1.09). Our Buy rating had been predicated on (1) improving semiconductor fundamentals, (2) continued growth in inverters, and (3) the company's restructuring initiatives to improve operating leverage. While we expect the first two scenarios to persist (we already forecast +13% Y/Y growth for semiconductor related revenues and +18% Y/Y increase in the inverter business in 2013), we believe the margin expansion story is well understood at this point and fully reflected in the stock. We maintain our PO of $18.50, based on a sum-of-the-parts analysis equating to 12-13X our CY13E EPS plus net cash.” Advanced Energy Industries closed on Wednesday at $19.17.