On Monday, Advanced Energy Industries (NASDAQ:AEIS), a company listed on NASDAQ:AEIS, saw its price target increased by Citi from $107 to $113, while the firm maintained a Buy rating on the stock. This adjustment follows the company's report of sales and EPS figures for the March quarter that did not meet the midpoint of their own guidance, falling short by 6% and 17% respectively. The shortfall was attributed to a deeper-than-anticipated inventory correction, particularly in the Industrial & Medical (I&M) and Telecom & Networking segments.
For the upcoming June quarter, Advanced Energy has projected sales that are 3% below the consensus estimates of Wall Street analysts. However, the company's EPS forecast is slightly more optimistic, with an expected 1% improvement over the consensus.
The company has observed a significant increase in orders within the Data center computing sector, driven by escalated investments in hyperscale AI. This surge is anticipated to fuel sequential growth in the June quarter and throughout the remainder of the year.
Advanced Energy's focus on efficiency and reliability is becoming increasingly critical, as AI server racks, which are utilized more and more, consume between three to five times the power of traditional server racks. According to Citi, as the I&M sector begins to stabilize and the Semiconductor sector shows signs of gradual improvement, both segments are expected to experience growth as the year progresses into the second half.
In light of these developments, Citi has revised its EPS estimates for the fiscal years 2024 and 2025, decreasing them by 17 cents and 2 cents respectively. The new price target of $113 is based on an 18 times price-to-earnings (P/E) multiple applied to the company's expected earnings for the calendar year 2025, which is an increase from the previous 17 times multiple. This change reflects a broader market multiple expansion.
InvestingPro Insights
Advanced Energy Industries (NASDAQ:AEIS) is navigating a complex market environment, underscored by the latest data from InvestingPro. With a market capitalization of approximately $3.67 billion and a P/E ratio of 35.36, the company is trading at a higher earnings multiple than some of its peers. This is further emphasized by an adjusted P/E ratio for the last twelve months as of Q1 2024, which stands at 28.46. Despite recent challenges, analysts remain optimistic about the company's profitability, with expectations of a profitable year ahead.
The company's revenue has seen a downturn, with a decrease of 16.8% over the last twelve months as of Q1 2024. This is a significant figure that investors should consider, especially when looking at the company's future growth trajectory. On a brighter note, Advanced Energy's solid gross profit margin of 35.49% demonstrates its ability to maintain profitability in the face of declining revenues.
For those looking to delve deeper, there are additional InvestingPro Tips available that could provide further insight into Advanced Energy's financial health and stock performance. The company's stock price movements have been notably volatile, and with analysts anticipating a sales decline in the current year, these tips could be invaluable for investors seeking to understand the potential risks and rewards. To access these insights and more, consider using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. With 9 additional InvestingPro Tips available, investors can gain a comprehensive view of Advanced Energy's market position and future prospects.
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