AXT (AXTI) AI Stock Analysis

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AXT

(NASDAQ:AXTI)

47Neutral

AXT's stock faces significant challenges with ongoing losses and no free cash flow, despite strong annual revenue growth. Technical indicators suggest bearish momentum, and the valuation reflects profitability issues. The earnings call highlights both progress and risks, such as export restrictions and rising expenses.

Positive Factors

Future Growth

A continued recovery in the global demand environment is expected to benefit the company in the future.

Revenue

Revenue exceeded expectations due to strong demand from data centers and growth in the raw materials business.

Revenue Growth

AXT's revenue is expected to grow by 30% YoY in 2024 driven by the cyclical recovery of GaAs and InP as well as continued growth of InP in AI data center.

Negative Factors

Earnings

Earnings per share were lower than expected due to some gross margin challenges.

Guidance

Guidance for the upcoming quarter was below expectations primarily because of trade restrictions on InP imposed by China.

Raw Material Costs

The weak guidance can be attributed to the large raw material price increase in Ge, more than doubling during the quarter, which led the company to walk away from orders that would not be profitable.

AXT (AXTI) vs. S&P 500 (SPY)

Market Cap

$55.17M

Dividend YieldN/A

Average Volume (3M)493.45K

Price to Earnings (P/E)―

Beta (1Y)2.05

Revenue Growth31.09%

EPS Growth35.51%

CountryUS

Employees1,527

SectorTechnology

Sector Strength49

IndustrySemiconductors

Share Statistics

EPS (TTM)-0.27

Shares Outstanding45,597,996

10 Day Avg. Volume522,364

30 Day Avg. Volume493,453

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.77

Price to Cash Flow (P/CF)15.10

P/FCF Ratio17.40

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$5.25

Price Target Upside352.59% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering3

AXT Business Overview & Revenue Model

Company DescriptionAXT, Inc. (AXTI) is a leading developer and producer of compound semiconductor substrates, which are used in a variety of applications across numerous sectors, including telecommunications, lighting, and industrial markets. The company's core products include gallium arsenide (GaAs), indium phosphide (InP), and germanium (Ge) substrates. AXT is known for its vertically integrated manufacturing process, which allows it to control the quality and cost-effectiveness of its products from raw material to finished substrate.

How the Company Makes MoneyAXT, Inc. generates revenue primarily through the sale of its high-performance semiconductor substrates to a diverse customer base. These substrates are critical components used in the production of LEDs, lasers, solar cells, and other electronic and optoelectronic devices. The company operates a vertically integrated business model, sourcing raw materials such as gallium and indium, which it processes into finished substrates at its manufacturing facilities. AXT's revenue streams are bolstered by strategic partnerships with key players in the semiconductor industry, enabling it to maintain a steady demand for its products. Furthermore, the company's focus on research and development supports its ability to innovate and expand its product offerings, thereby enhancing its market position and financial performance.

AXT Financial Statement Overview

Summary

AXT faces profitability challenges with negative margins and no free cash flow. The income statement indicates declining revenue trends and ongoing losses. The balance sheet is stable with moderate debt, but declining equity is concerning. The absence of free cash flow highlights operational efficiency issues.

Income Statement

Neutral

The income statement shows a declining revenue trend with a recent revenue growth rate of 31.1%. However, the company has been operating at a loss, with a negative net profit margin of -11.7% and a negative gross profit margin of 24.0% in the latest year. This reflects ongoing profitability challenges.

Balance Sheet

Positive

The balance sheet is relatively strong with a moderate debt-to-equity ratio of 0.26 and an equity ratio of 56.8%, indicating good financial stability. However, declining stockholders' equity raises concerns about the company's ability to sustain its capital structure long-term.

Cash Flow

Neutral

Cash flow analysis reveals no free cash flow, with both operating cash flow and free cash flow at zero. This may impact the company's ability to fund operations without external financing. The operating cash flow to net income ratio is undefined due to zero operating cash flow.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
99.36M	75.80M	141.12M	137.39M	95.36M
	Gross Profit
23.84M	13.32M	52.12M	47.41M	30.27M
	EBIT
-14.80M	-21.57M	12.55M	12.90M	-393.00K
	EBITDA
-338.00K	-8.78M	20.67M	19.98M	8.27M
	Net Income Common Stockholders
-11.62M	-17.88M	15.81M	14.57M	5.04M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
22.83M	39.89M	44.29M	42.18M	72.84M
	Total Assets
339.31M	358.70M	370.07M	332.44M	298.86M
	Total Debt
49.78M	55.73M	48.40M	16.05M	12.79M
	Net Debt
26.94M	17.98M	13.45M	-20.71M	-59.82M
	Total Liabilities
84.41M	89.56M	80.33M	52.21M	43.33M
	Stockholders Equity
192.77M	203.99M	221.61M	211.53M	192.62M
Cash Flow		Free Cash Flow
-17.88M	-7.07M	-37.23M	-32.95M	-13.99M
	Operating Cash Flow
-12.11M	3.40M	-8.77M	-3.31M	5.87M
	Investing Cash Flow
-4.45M	-2.60M	-25.22M	-38.81M	-16.42M
	Financing Cash Flow
-536.00K	8.61M	38.03M	5.72M	52.66M

AXT Technical Analysis

Technical Analysis Sentiment

Negative

Last Price1.16

Price Trends

50DMA

1.70

Negative

100DMA

1.92

Negative

200DMA

2.32

Negative

Market Momentum

MACD

-0.08

Positive

RSI

35.55

Neutral

STOCH

11.16

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AXTI, the sentiment is Negative. The current price of 1.16 is below the 20-day moving average (MA) of 1.51, below the 50-day MA of 1.70, and below the 200-day MA of 2.32, indicating a bearish trend. The MACD of -0.08 indicates Positive momentum. The RSI at 35.55 is Neutral, neither overbought nor oversold. The STOCH value of 11.16 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AXTI.

AXT Risk Analysis

AXT disclosed 58 risk factors in its most recent earnings report. AXT reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

AXT Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MTSI	75 Outperform	$7.38B	138.48	-9.49%	―	26.40%	-234.22%
SWKS	72 Outperform	$9.26B	18.47	8.34%	5.16%	-12.91%	-42.12%
Sector *	57 Neutral	$19.52B	9.58	-12.47%	2.79%	5.43%	-24.71%
COHR	53 Neutral	$8.59B	―	0.88%	―	14.61%	85.44%
QRVO	52 Neutral	$5.80B	194.84	0.77%	―	9.51%	―
LITE	50 Neutral	$3.77B	―	-48.63%	―	-1.72%	-94.98%
AXTI	47 Neutral	$55.17M	―	-5.86%	―	31.09%	35.51%

* Technology Sector Average

Performance Comparison

AXTI

AXT

1.16

-2.27

-66.18%

COHR

Coherent Corp

55.20

1.60

2.99%

MTSI

MACOM Technology Solutions Holdings

97.82

-0.58

-0.59%

SWKS

Skyworks Solutions

56.54

-41.79

-42.50%

QRVO

Qorvo

56.27

-55.09

-49.47%

LITE

Lumentum Holdings

51.27

7.82

18.00%

AXT Earnings Call Summary

Earnings Call Date: Feb 20, 2025 | % Change Since: -49.34% | Next Earnings Date: May 1, 2025

Earnings Call Sentiment Neutral

The earnings call reflects a company experiencing significant growth in fiscal 2024, with strong revenue increases and improved margins. However, the fourth quarter presented challenges such as declining gross margins, increased operating expenses, and potential revenue delays due to export restrictions in China. The overall sentiment is cautious optimism, balancing substantial annual progress with notable quarterly setbacks.

Highlights

Significant Revenue Growth in Fiscal Year 2024

Revenue for the fiscal year 2024 was $99.4 million, up from $75.8 million in fiscal year 2023, reflecting a 31% increase in revenue driven by growth across all product categories.

Improved Gross Margin and Net Loss

Non-GAAP gross margin for fiscal year 2024 was 24.3%, up from 18.1% in fiscal 2023. GAAP gross margin also improved to 24% from 17.6%. Non-GAAP net loss improved to $8.5 million from $14.3 million in fiscal 2023.

Expansion in Data Center and Wireless Markets

Strong performance in data center infrastructure and wireless handset markets, particularly in China, contributed to revenue growth, with notable advancements in low EPD gallium arsenide and 8-inch gallium arsenide and 6-inch indium phosphide substrates.

Growth in Raw Material Joint Ventures

Revenue from consolidated raw material joint venture companies was $32 million in 2024, up 12% from the previous year, driven by increased demand for materials such as gallium, arsenic, and indium.

Lowlights

Q4 2024 Gross Margin Decline

Non-GAAP gross margin in Q4 2024 was 17.9%, down from 24.3% in Q3 2024 and 23.2% in Q4 2023, primarily due to lower benefits from the recycling program and lower ingot starts.

Higher Operating Expenses

Non-GAAP operating expenses increased to $9.9 million in Q4 2024 from $9.0 million in Q3 2024 and $7.5 million in Q4 2023, primarily due to increased legal and R&D expenses.

Impact of China Export Controls

Trade restrictions on indium phosphide are expected to delay $4 million to $5 million in sales for Q1 2025, affecting revenue from China and requiring an export permit process.

Decrease in Cash and Investments

Cash, cash equivalents, and investments decreased by $5 million to $33.8 million as of December 31, primarily due to reductions in loan balances and non-cash expenses.

Company Guidance

During AXT's Fourth Quarter 2024 Financial Conference Call, the company provided various financial metrics and guidance. For Q4 2024, revenue was $25.1 million, up from $23.6 million in Q3 2024 and $20.4 million in Q4 2023. Product category revenue included $9.1 million from indium phosphide, $5.4 million from gallium arsenide, $1.6 million from germanium substrates, and $9.0 million from consolidated raw material joint ventures. Regional revenue distribution was 79% from Asia Pacific, 11% from Europe, and 10% from North America. Non-GAAP gross margin fell to 17.9% from 24.3% in Q3 2024. Operating expenses rose to $9.9 million, mainly due to increased legal and R&D expenses. The non-GAAP operating loss was $5.4 million, with a net loss of $4.3 million or $0.10 per share. Cash and investments decreased by $5.0 million to $33.8 million. For fiscal year 2024, revenue totaled $99.4 million, a 31% increase from 2023, with a non-GAAP net loss of $8.5 million. Looking ahead to Q1 2025, revenue is expected to range between $18.0 million and $20.0 million, with a non-GAAP net loss between $0.13 and $0.15 per share due to indium phosphide export restrictions impacting sales.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.