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Market Overview

Nlight's Above Average Growth Prospect Appreciated By Stifel


Nlight Inc (NASDAQ: LASR), a supplier of semiconductor and fiber lasers that saw its stock soar on its first day of trading in April, is well positioned to show a superior growth rate compared to its peers, according to Stifel.

The Analyst

Stifel's Patrick Ho initiated coverage of Nlight with a Buy rating and $40 price target.

The Thesis

Nlight's customer base includes the industrial, microfabrication, and aerospace markets but its strong exposure to the industrial segment should help the company generate above average growth, Ho said in a note. Specifically, the industrial market stood at $1 billion in 2015 and should grow to $2.5 billion by 2020 through growth in cutting, welding, marking and additive manufacturing. The company's strong penetration of the market should grow over the years and an increasing favorable mix of the segment should also help drive gross margin increases.

As such, management's longer-term gross margins target of 45 percent and operating margins of 24 percent are achievable over time as the industrial segment boasts a 50 percent incremental gross margin rate, the analyst.

Ho highlighted other factors to support a bullish stance on the stock, including an overall differentiated product mix that can gain share across all categories, an already strong position in the growing Chinese market and the company's vertical integration strategy.

Price Action

Shares of Nlight were trading around $30.30 Monday afternoon.

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