Ultra-Clean Tech (UCTT) small-cap that saw a surge of activity in the afternoon yesterday with over 2800 June $60 calls bought up to $4.10 ahead of earnings on 4/28 after the close. Shares closed higher two of the last three with an average closing move of 3.5% but skewed heavily towards upside moves (the four higher closes averaged 14.75% while the four lower closes averaged 2.49%). Shares recently pulled back to VWAP for the year and bounced again and room above to $64.50 and the prior highs which the rising channel targets $68+.
The Street is looking for $0.85 on $392.5M in sales, a 22.3% increase Y/Y, while next quarter is guided to $0.90 and $435.5M. The FY is $3.57 and $1.73B. The $2.36B company trades 14X earnings, 1.7X sales, and 11.8X cash. UCTT is a pure-play on semiconductor production as they design hydraulic contamination control systems for the manufacturing process. They are particularly linked to foundry and logic as well as memory demand from their top customers and should benefit from increased demand as we’ve heard some top names plan for expansion in capacity and equipment buys. UCTT also noted in March that they’re seeing huge demand driven by ongoing areas of digital transformation and more complex chip processes like AI, HPC, IoT, and 5G.

The company also recently completed their deal for Ham-Let, a key part of their long-term vision. Ham-Let is a provider of ultra-High Purity and industrial flow control systems. On the potential:

“Ham-Let components are used primarily within our current gas panel product line as well as for gas distribution throughout semiconductor tools. Gas delivery is a significant element of the sub-fab infrastructure within chip-making facilities, providing an additional platform for growth. By leveraging UCT’s solid customer relationships and global operational footprint, we see a sizable opportunity to grow Ham-Let’s 5% share of a $2 billion market.”
Analysts have an average target for shares of $58 with a Street High of $70 from DA Davidson. They were out on 4/20 raising estimates citing an improved outlook. Needham raising estimates on 4/12 citing a stronger outlook for WFE utilization rates. The analyst also sees higher revenue guidance as UCTT drives cross-selling opportunities across its global footprint and they also have significant gross margin expansion opportunity through vertical integration. Short interest is 2.6% and down from around 20% in late 2019. Hedge fund ownership fell 5% in Q4, Driehaus Capital a notable holder of stock.