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Hawk’s Nest

Unusual Call Buys in Attractive Small Cap Semi Equipment Play

by | Oct 15, 2021

Axcelis Tech (ACLS) unusual options activity on 10/15 trading 30X daily calls with a focus on March $55 calls that traded more than 1000 contracts with buyers in smaller lots in the $3.30 to $4 range. ACLS does not have any other notable open interest. ACLS shares have been consolidating for a few weeks above its rising 55-day moving average and a strong move since the mid-July lows. ACLS designs, manufactures and services ion implantation and other processing equipment used in the fabrication of semiconductor chips. Ion implantation is a principal step in the transistor formation cycle of the semiconductor chip manufacturing process. Ion implantation is also used to change the material characteristics of the silicon for reasons other than electrical doping, a process known as “material modification.” An ion implanter is a large, technically advanced system that injects dopants such as arsenic, boron or phosphorus into a wafer. ACLS’ Purion flagship systems are all based on a common platform which enables a unique combination of implant purity, precision and productivity. Axcelis and Applied Materials are the only ion implant manufacturers with a full range of implant products, as well as service and support infrastructures. ACLS estimates the ion implant systems market at greater than $1B. Automotive adoption of EV and ADAS is expected to drive high growth in power and image sensor devices and 5G also seen as a growth driver. In Q2, 70% of shipments went to mature foundry/logic customers and 30% to memory customers, with an even split between DRAM and NAND. ACLS guided FY21 to $625M vs. estimates of $557M.  Overall demand for capital equipment in the semiconductor industry is being driven by several factors, including supply chain shortages, high-fab utilization across all segments causing significant new fab investment, government incentive programs creating geographic expansion opportunities for our customers and the fundamental underlying drivers that started this growth cycle of 5g, data analytics and AI. ACLS has a market cap of just $1.67B and trades 16.3X Earnings, 3.25X Sales, 7.6X Cash and 32X FCF with a strong balance sheet. ACLS revenues are seen growing 31.8% in 2021 with 82% EPS growth and 10.4%/23% respectively in FY22. ACLS is benefiting from a strong memory cycle, exposure to IoT, a new product family and may enter the high-end logic market. Analysts have an average target of $55 on shares with short interest low at 3.7% of the float.