BESI shares surged 25% due to high AI demand, with fair value estimate of €120

From Morningstar: 2024-07-07 20:28:00

BE Semiconductor Industries (BESI) shares have surged 25% this year due to high demand in semiconductor packaging for AI applications. Key figures include a Fair Value Estimate of €120, 2-star Morningstar Rating, Narrow Moat Rating, and High Uncertainty Rating. The company’s flexible model and focus on advanced packaging contribute to its success.

Semiconductor packaging, crucial for AI, benefits from advanced techniques like hybrid bonding expertise from BESI. This enhances data transfer speed, chip performance, and cost efficiency. Despite the premium valuation at €166 per share, BESI’s quality makes it a solid long-term investment with an established market position.

BESI’s financial strength entails €300 million in long-term debt, mostly convertible, and €400 million in cash. The company’s strategic debt conversion and share repurchase programs successfully offset potential dilution. While BESI holds a High Morningstar Uncertainty Rating, its risk mitigations and service revenue resilience affirm its industry resilience.

BESI is favored for its essential role in hybrid bonding machines and solid capital allocation. The company’s cyclical industry acumen, diverse product investments, and potential acquisition appeal contribute to its bullish outlook. However, revenue concentration and industry cyclicality pose risks, as less advanced equipment could be easily replaced, drawing bearish sentiments.



Read more at Morningstar: After the Stock Rally, Is BESI a Buy, Sell or Hold?