Up Over 90% in the Past Month, Is Aehr Test Systems a Buy?

Fremont, Calif.-based Aehr Test Systems (AEHR) provides test systems for burning-in and testing logic and optical and memory integrated circuits. It has installed more than 2,500 systems worldwide that amounted to $16.6 million in sales during its fiscal year 2021.

The increase in the quality and reliability needs of the automotive and mobility integrated circuit markets is driving test requirements, capacity requirements, and several new opportunities for Aehr’s portfolio of products.

Aehr has been on an absolute tear in 2021. The stock has gained an astonishing 661% in price year to date and is up more than over 90% in the last month, easily besting the broader markets. So, should investors be wary of a pullback, or does the stock have sufficient  room to surge higher in price the coming months?

Aehr Systems delivered solid quarterly results

The recent uptick in Aehr stock came on the back of results for the company’s 2022 fiscal first quarter that ended in August. Aehr’s bookings in Q1 were at record levels, allowing the company’s management to raise its revenue guidance for its fiscal 2022 also.

In Q1, Aehr Test Systems reported revenue of $5.6 million, which represented a 181% rise year over year. Its bookings stood at $20.7 million, which was higher than the revenue it generated in 2021. Furthermore, its adjusted loss per share stood at $0.02, which was better than Wall Street’s $0,03 forecast.

Company CEO Gayn Erickson explained, “As we discussed and anticipated last year during the beginning of the COVID-19 pandemic, we have emerged a stronger company, with more production customers, more markets and applications, and higher-value products than we had before the start of the pandemic.”

A solid quarter in Q1 meant that Aehr increased its full-year revenue guidance by a stellar 80% in fiscal 2022 to $50 million, indicating year-over-year growth of more than  200%. So, this suggests that investors were buoyed by Aehr’s robust revenue guidance for this fiscal year.

What next for investors?

Aehr Test Systems is off to a strong start in fiscal 2022. Since the end of the last quarter, it has announced an additional $19.4 million in bookings, bringing its total to $40 million. The company attributed its strong bookings to sizeable orders received from a major Fortune 500 customer that is an automotive semiconductor supplier.

Aehr claims that it is in discussions with other silicon carbide suppliers regarding their wafer-level test and burn-in requirements. It expects to add multiple silicon carbide customers in the next six quarters, which will allow Aehr to ramp up production.

The company expects the silicon carbide power semiconductor device market to increase at a 36% annual rate between 2020 - 2026 to $4.5 billion at the end of the forecast period, which will be a key driver of top-line growth.

In addition, the accelerated transition to the widespread adoption of electric vehicles will also drive demand for Aehr products over the long term.

The final takeaway

We can see that Aehr Test Systems is poised to benefit from a rapidly expanding addressable market and multiple secular tailwinds. Its $71 million revenue forecast for its fiscal year 2023 values the stock at a 7x price-to-forward-sales multiple. Analysts also expect its bottom-line to improve from a $0.14 loss per share in 2021 to earnings of $0.69 in 2023, making the stock a top long-term bet right now.

AEHR shares were trading at $20.67 per share on Thursday afternoon, up $0.21 (+1.03%). Year-to-date, AEHR has gained 717.00%, versus a 19.29% rise in the benchmark S&P 500 index during the same period.

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.

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