As a test and quality control equipment manufacturer for the semiconductor industry, Aehr Test Systems (AEHR +2.28%) and its investors know all about the industry's cyclicality. Customers cut chip orders dramatically in bad times, only to hike them aggressively in good times. That's reflected in the stock price volatility, which implies risk; this week, the risk was on the upside.
Why Aehr Test Systems stock outperformed this week
The stock soared by 33.8% in the week to Friday morning on the back of the company's Tuesday announcement of preliminary results for its fiscal fourth quarter and full year 2024, ended May 31. It's not so much that its end markets are on fire right now; more the case that they are not quite as bad as management previously anticipated. Here are some of the highlights:
- Fourth-quarter revenue of $16.6 million compared to implied guidance of at least $15.4 million
- Full-year generally accepted accounting principles (GAAP) net income excluding tax benefit of $12.3 million compared to guidance for $11 million
It's a good result relative to expectations, but note that Aehr's sales were $22.27 million in the fourth quarter of 2023.
A recovery in progress
The big reason for the revenue decline is that its semiconductor customers (including On Semiconductor) are pushing out orders in response to slowing automaker demand. This is notable for silicon carbide chips in electric vehicles, recently Aehr's most important end market.
Image source: Getty Images.
However, it's unclear if stabilization in that market is the reason for the fourth-quarter surprise. CEO Gayn Erickson said he expects silicon carbide will "continue to be a key contributor to revenue," but he also sees opportunities in a host of other target markets.
Investors will get more color on Aehr's earnings conference call on Tuesday and when key customer On Semiconductor reports earnings on July 29.
