History Suggests the Nasdaq Could Soar in 2024, and Here’s the Stock to Buy If It Does

A digital image of a semiconductor network with a car imprinted in the center

A digital picture of a semiconductor community with a automotive imprinted within the heart

Within the 37-year historical past of the Nasdaq-100 index, it has solely posted a loss in consecutive years on one event: through the dot-com tech crash from 2000 to 2002. Due to this fact, when the index plunged 33% final 12 months, a rebound in 2023 was the possible final result.

True to historical past, the Nasdaq-100 has completely ripped larger with a 52% acquire this 12 months. Macroeconomic headwinds, like inflation and rate of interest pressures, eased, which was useful. However traders shall be happy to know that additionally bodes very nicely for 2024. See, bounce-back years like 2023 have all the time been adopted by one other constructive 12 months, which tends to supply a return of 21.5% (on common).

With that in thoughts, semiconductor inventory Axcelis Applied sciences (NASDAQ: ACLS) might be a incredible purchase if the market continues to maneuver larger. The corporate is rising its income and earnings at a brisk tempo, and its inventory trades at a discount valuation proper now. Here is what traders have to know.

Axcelis is carrying an enormous order backlog into 2024

Axcelis is not a chip producer, however it sells its ion implantation tools to main chip makers, forming a essential a part of the fabrication course of. Due to this fact, the corporate continues to be uncovered to rising demand throughout the business for chips in classes like electrical automobiles and synthetic intelligence (AI).

Actually, Axcelis has skilled sturdy demand this 12 months from producers of silicon-carbide energy gadgets within the electrical car business. Energy gadgets course of and ship electrical energy in workloads requiring excessive currents, and silicon carbide results in extra environment friendly outcomes than conventional silicon-based {hardware}. In electrical automobiles, that interprets to quicker charging occasions and extra mileage per cost.

AI is not a significant income driver for Axcelis in the meanwhile, however in its third-quarter convention name with traders, administration highlighted the know-how’s requirement for growing quantities of reminiscence (DRAM) and storage (NAND) capability. Consequently, the corporate is anticipating AI to change into a supply of sturdy demand.

Nonetheless, the corporate has its fingers full with its current end-markets. It at present has an order backlog price $1.2 billion, almost a report excessive, and it’ll carry nearly all of it into the brand new 12 months. For context, it is equal to greater than 12 months’ price of income.

Income is on observe to set a report this 12 months

Axcelis generated $820.3 million in income by means of the primary three quarters of 2023 (ended Sept. 30), representing a year-over-year enhance of 25.4%. The corporate is on observe to ship a record-high $1.1 billion in income for the complete 12 months.

The corporate’s outcomes are much more spectacular contemplating many chipmakers have not too long ago suffered a slowdown in income development — some, like Superior Micro Units, even noticed revenues shrink. Markets equivalent to private computing and gaming have suffered from a drop in client spending however ought to enhance subsequent 12 months, given inflation and rates of interest have declined from their peaks.

However Axcelis is considerably insulated from a few of these short-term struggles as a result of its clients sometimes plan their capital expenditures years upfront. In the event that they intend to have a better chip manufacturing capability sooner or later, they may place tools orders at present in preparation (therefore Axcelis’ deep order backlog). That is why Axcelis inventory has the potential to be a dependable long-term performer.

A digital image of a semiconductor network with a car imprinted in the center.

Picture supply: Getty Photographs.

Axcelis inventory appears like a complete discount going into 2024

Axcelis is extremely worthwhile, and it is on observe to ship $7.27 in earnings per share for the 12 months. Based mostly on its present inventory value close to $136, it trades at a price-to-earnings (P/E) ratio of roughly 19.

That is a 32% low cost to the Nasdaq-100 index, which trades at a P/E ratio of 28. The index is dwelling to outstanding chip firms like Nvidia, Superior Micro Units, and Texas Devices (amongst others).

Regardless of Axcelis not producing chips, administration’s commentary suggests it’s going to profit from the AI tailwind going ahead. The corporate additionally has a really sturdy 12 months forward due to its order backlog. Electrical car demand may also possible stay sturdy in 2024 because the business continues to scale up.

Based mostly on these components, mixed with Axcelis’ capacity to develop its prime and backside strains in robust financial circumstances, its inventory deserves a bit of extra credit score on the valuation entrance. I feel it’s going to possible get it within the new 12 months.

Do you have to make investments $1,000 in Axcelis Applied sciences proper now?

Before you purchase inventory in Axcelis Applied sciences, think about this:

The Motley Idiot Inventory Advisor analyst crew simply recognized what they imagine are the 10 finest shares for traders to purchase now… and Axcelis Applied sciences wasn’t considered one of them. The ten shares that made the reduce may produce monster returns within the coming years.

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*Inventory Advisor returns as of December 11, 2023

 

Anthony Di Pizio has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Superior Micro Units, Nvidia, and Texas Devices. The Motley Idiot has a disclosure coverage.

Historical past Suggests the Nasdaq Might Soar in 2024, and Here is the Inventory to Purchase If It Does was initially revealed by The Motley Idiot

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