ACM Research Stock Rebounds 13% After Steep Post-Earnings Drop Despite 37% Revenue Growth and Raised Outlook

Shares of ACM Research Inc. rebounded about 13% in their latest session, recovering part of a sharp drop that followed the chip equipment maker's third-quarter report.

ACM shares rose $5.30 to $44.61, valuing the company at about $3.1 billion. The stock is up about 35% over the past year.

Post-earnings selloff

The rebound follows a steep decline. ACM Research shares fell 13.64% on the day it reported third-quarter results and raised its full-year guidance.

Strong quarter

The results showed rapid growth. ACM Research reported non-GAAP earnings of 55 cents a share, beating estimates by 3 cents, while revenue surged 36.6% year over year to $367.69 million. Shipments rose 30.6% to $343.5 million.

Management highlighted the momentum on its earnings call. "We delivered strong results for the September quarter," the company said, attributing the growth to market share gains and successful execution in production and supply chains.

Margin pressure

Margins were the key concern. Gross margin for the third quarter was 41.6%, with operating expenses rising 12.7%, and the company expects modest gross margin improvement in the next quarter.

That compared with a higher level earlier this year. In the second quarter, gross margin declined to 46% from 48.7% a year earlier.

Management attributed the margin pressure partly to product mix, foreign exchange and an inventory provision for the quarter.

Management reaffirmed its long-term targets. ACM said it remains confident in maintaining long-term gross margins between 42% and 48%, supported by differentiated and patent-protected technologies.

Growth drivers

New products are fueling growth. The company highlighted significant progress in its proprietary panel-level horizontal electroplating technology, with shipments to customers in Asia.

The company is also expanding capacity. ACM is adding a second building at its Lingang facility and will soon open a new operations center in Oregon.

Strong balance sheet

ACM has substantial financial resources. The company ended the quarter with gross cash of $1.3 billion and net cash of $0.9 billion.

Valuation

The stock trades roughly in line with its historical earnings multiple. GuruFocus said ACM's trailing P/E ratio of 18.29 was nearly identical to its five-year median of 18.33.

Investors will watch whether ACM can improve margins while maintaining rapid growth, and how its heavy exposure to Chinese chipmakers evolves amid trade tensions.