AXT (AXTI) Pulls Back After A Strong Run, Is The Stock Still Cheap?
AXT (AXTI) draws fresh attention after recent share price moves, with the stock last closing at US$60.61. Investors are weighing this level against the company’s fundamentals and recent return profile.
Over the past year AXT has delivered very large total shareholder returns, with the 1-year total shareholder return more than 10 times higher, even though the share price return over the last 90 days is down 43.2% and recent 7-day trading also shows weaker momentum.
Compare AXT's sharp moves with other semiconductor players that screen for stronger fundamentals and steadier trends by scanning the hand-picked list of solid balance sheet and fundamentals (52 results).
Given AXT's sharp pullback after a very strong 1 year run, you now face a simple choice: buy at this reset level or wait for a deeper pullback. The valuation numbers can help frame that decision next.
Most Popular Narrative: 33.8% Undervalued
AXT's most widely followed narrative points to a fair value of $91.60 compared with the last close at $60.61. That gap hangs on aggressive growth and margin assumptions that investors will want to understand in detail.
The analysts have a consensus price target of $91.6 for AXT based on their expectations of its future earnings growth, profit margins and other risk factors.
In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $911.9 million, earnings will come to $360.8 million, and it would be trading on a PE ratio of 27.5x, assuming you use a discount rate of 11.3%.
Want to see what turns AXT's current $3.9 million of earnings into the much larger figure embedded in this fair value? The narrative leans heavily on rapid revenue expansion, a sharp lift in profit margins and a future earnings multiple more often linked to strong growth stories. Curious which of those levers does the heavy lifting in this model and how much conviction analysts place on each input.
Result: Fair Value of $91.60 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, the AXT story also hinges on easing export permit issues and a heavy revenue tilt to China, both of which could quickly challenge the bullish narrative.
Find out about the key risks to this AXT narrative.
Another View on AXT’s Valuation
The analyst model indicates AXT appears 33.8% undervalued with a fair value estimate of $91.60. In contrast, Simply Wall St’s work using a P/S ratio presents a different perspective. At $60.61, AXT trades on a P/S of 31x. This compares with a fair ratio estimate of 24.2x, the US Semiconductor industry at 6.4x, and peers at 3.5x. That wide gap suggests notable valuation risk if sentiment or growth expectations cool, raising the question of which signal investors may choose to focus on at the moment.
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
With mixed signals around AXT's recent pullback and valuation, it makes sense to check the underlying drivers for yourself and move quickly if needed. A useful way to pressure test your own thesis is to weigh the 2 key rewards and 3 important warning signs.
Looking for more investment ideas beyond AXT?
If you only focus on AXT, you could miss out on other stocks that fit your goals. Use the Simply Wall St screener to broaden your opportunity set.
- Target potential bargains by scanning companies that pass quality checks and valuation filters with the 45 high quality undervalued stocks.
- Prioritize stability by reviewing companies that score well on balance sheet strength and fundamentals through the list of solid balance sheet and fundamentals (52 results).
- Hunt for lesser known potential opportunities by checking the 19 high quality undiscovered gems before they attract wider attention.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com