Source: Beast Finance Author: Beast Finance
Summary:
(1) The stock of American Superconductor (AMSC) soared 60% after South Korean researchers announced the discovery of the first atmospheric room temperature superconductor LLK-99, a potentially revolutionary compound, and hype.
(2) American Superconductor is a company specializing in superconductors, providing advanced power electronics and superconducting systems for power grids and the military.
(3) The company has had negative revenue for the past 5 quarters, but expects to grow substantially in the future.
As the fourth industrial revolution continues and the world begins to realize the impact of superconducting systems on our daily lives, how can we make better investment decisions based on these trends? Before Boldbeast Finance analyzed
Powell Industries (POWL ) and Flextronics International (Flex) have mentioned the idea of the fourth industrial revolution in their articles.
In a recent research note, Wedbush analyst Dan Ives also highlighted the development of a potentially radical new superconductor compound called LK-99, saying that the hype surrounding superconductors has proven that we are on the verge of a fourth industrial revolution. middle.
The news also sent shares of American Superconductor, a company specializing in superconductors, skyrocketing 60% overnight.
Shares of AMSC have jumped 60% on the recent news and are up more than 50% in the past month. However, all of the recent gains have been given back in the past two days, with shares of AMSC now down to around $10.
What does American Superconductor do?
You may have heard of the word superconductor, and you may know what it means, but before we started researching this company, we didn’t know exactly what American Superconductor does and what products it sells to customers? In order to get a better understanding of this company, we deliberately browsed the website of American Superconductor and found the following introduction summarizing the company and its products.
[The world's energy needs are like a symphony. Its peaks and valleys are like notes in a song. The instruments of this great orchestra are the many parts of the electrical grid—transmission lines, substations, and generators, all of which feed energy into the rhythm of life. American Superconductor is a grid-wide supplier of advanced power electronics and superconductor systems. 】
AMSC's products mainly include Gridtec, Windtec and Marinetec products.
Gridtec solutions include utility-scale components and system solutions for power generation through transmission and distribution. These solutions serve utilities, power reliability and resiliency, industrial applications and renewable energy. The D-Var compensation solution is one of the company's main products for the grid.
Windtec's products include onshore and offshore wind turbine design solutions, advanced hardware and software solutions, and renewable energy interconnection solutions.
Marinetec products include marine power, protection and propulsion systems. For example, their HTS degaussing system has been used by the US Navy to mask the magnetic signature of ships. In April, AMSC also signed a contract with the U.S. Navy for a deployable mine countermeasure system. Although the contract value is only $8 million, as AMSC CEO Daniel McGahn explained during the Q4 2022 earnings call, it represents another step forward in AMSC product sales in the naval market A positive step:
American Superconductor was founded in 1987 and the company is headquartered in Boston, Massachusetts. It's a small growth company with a current market cap of just under $500 million. Only 3 Wall Street analysts have given 2 Strong Buy ratings and 1 Buy rating in the last 90 days.
And in 2022, only one analyst gave a hold rating in November, because although the company's revenue is growing, it lacks profitability, and many people don't know much about the industry, so few people Concerned, while AMSC's revenues will decline slightly from 2022 to 2023, analysts expect a substantial increase by 2025.
Although analysts' expectations for the coming quarters have improved, AMSC's earnings are still negative and have missed expectations for five consecutive quarters.
The following is AMSC's financial report for May, which shows AMSC's revenue growth since fiscal 2017, and shows that AMSC's revenue growth has improved.
Despite a 12% year-over-year increase in revenue, Q422 (the quarter ended March 31, 2023) was disappointing, with non-GAAP EPS of $0.28 missing expectations by $0.08. Here is the company's press release:
[AMSC reported a net loss of $35 million, or $1.26 per diluted share, for fiscal 2022, compared to a net loss of $19.2 million, or $0.71 per diluted share, for fiscal 2021. Dollar. The company's non-GAAP net loss for fiscal 2022 was $28.8 million, or $1.03 per share, compared with a non-GAAP net loss of $17.1 million, or $0.63 per share, for fiscal 2021. 】
While operating loss is higher than FY2021, the higher loss is due in part to recent acquisitions (including Neeltran in May 2021) and product line expansion/diversification to leverage mining/materials, renewables, semiconductors and the growth opportunity in the military market, AMSC Chairman, President and Chief Executive Officer Daniel McGahn further explained:
[Our fiscal 2022 results reflect our strategic efforts to diversify the company by market, geography and product offerings. , and our efforts to achieve integration synergies and lower cost structures. We believe this diversification positions us to capitalize on future investments in renewable energy, metals and materials extraction, particularly in vehicle electrification, semiconductors and defense businesses. Our company has successfully transitioned from a pure play wind company to one primarily focused on the grid and military resiliency markets, as further evidenced by our recent launch of the US Navy solution - Sea Mine Countermeasures. We believe our growing and consistent grid demand may enable us to capture opportunities in new markets, introduce new products and expand our customer reach. I thank our team for their commitment and delivery into FY 2022 and look forward to a bright FY 2023. 】
AMSC's guidance for the fourth quarter of 2023 includes a net loss of no more than $6.5 million, or $0.23 per share. The company's cash flow is growing at a rate of approximately $1 million to $3 million per quarter, and it is expected that by June 30, 2023, the company's cash flow will reach $22 million. As long as the company turns around in the next year or so, AMSC's financials should be in good shape based on current projections. The companies also said they expect to realize annual cost savings of approximately $5 million beginning in the first quarter of 2023, due in part to operational synergies.
In July of this year, American Superconducting announced about $43 million in new orders for energy power systems, about half of which will be realized in fiscal year 2023. Beast Finance believes that this will further boost American Superconducting's future growth prospects.
Comparison with peers
Although American Superconductor's share price performance in the past year has begun to catch up with its peers, Powell Industries' share price has also risen by nearly 40% after it announced its financial report that exceeded its peers on August 1. This could be a good sign for AMSC.
Risks and Growth Prospects to Consider Risks and
Growth Prospects to Consider around the dollar before falling back to levels around $10 last Thursday. While the recent news about the atmospheric-pressure, room-temperature superconductor LLK-99 may have contributed to AMSC's stock price boom, it doesn't do much for AMSC's future earnings potential.
While FY 2022 is a transition year for AMSC, the outlook for continued growth in FY 2023 is encouraging, and there is plenty of room for growth in the markets AMSC is targeting. The following is an introduction to American Superconductor's future growth prospects.
However, AMSC's profitability remains a concern as quarterly losses erode cash on hand. On the other hand, the company remains focused on controlling overhead costs and adjusting prices where possible to boost revenue. At the earnings conference for the fourth quarter of 2022, American Superconductor CEO McGahn discussed the company's ongoing transformation:
[Fiscal year 2022 is a fiscal year of continued diversification of our business and strong growth in global orders. We announced a $150 million new energy power system order this year. This is an increase of more than 75% from the previous year's level. In fiscal 2022, we see strong order intake across the company of more than $165 million. About a quarter of our sales come from renewable energy projects, about a quarter from industrial projects and about 15 percent from semiconductor projects. Metals, Mining and Materials accounted for nearly 10%, and Navy a little over 10%. The diversity of orders and sales has allowed us to transition from a pure play wind energy company to one now focused on the grid and military resilience markets. ]
While the fourth industrial revolution has positively impacted growth opportunities in areas such as renewable energy, semiconductors, and metals/mining, the company still faces multiple quarters of negative cash flow headwinds. If AMSC's management can continue to improve margins, cut overhead costs, and continue to ramp up orders, the company's stock could be attractive to growth investors, and we'll stay on the sidelines until they actually turn profitable , to observe the development of the situation.