Novellus Systems (NVLS) is a leading supplier of interconnect formation equipment used in semiconductor manufacturing. The recovery in technology markets — particularly the strength at memory and foundry manufacturers — has led to very strong revenue and earnings growth in the last three quarters, beating the Zacks Consensus Estimates.
We expect continued improvement, driven by technology purchases and capacity additions towards the year-end. The company also has a good financial position and returns cash to investors in the form of share repurchases.
Although customer concentration and a significant cost structure are of concern, we believe they will not pose a big challenge given the growing demand. Consequently, we are upgrading Novellus shares to Outperform and setting a target price of $30.Zacks Investment Research
