Why Aehr Test Systems Stock Is Soaring Higher Today

The company said its fiscal fourth quarter will come in better than expected.

Aehr Test Systems (AEHR 24.01%) has had a difficult 2024 but is feeling positive about the coming quarters. Shares of Aehr traded up 30% as of 10 a.m. ET after the company said it expects fiscal 2024 revenue and net income to exceed previous guidance.

Good news after a bad quarter

Aehr makes semiconductor testing equipment for several industries and applications. Its tools are a must-have for makers of chips destined for high-stress environments like electric vehicles (EV). The stock surged as much as 2,500% in the early years of this decade as excitement about EVs grew.

But this year, the stock has been thrown into reverse, down more than 50% in 2024 coming into Wednesday due to declining year-over-year revenue. A slowdown in EV sales, coupled with higher interest rates and general sluggishness among industrial customers, has eaten the company’s sales and stunted growth.

Aehr sees better times ahead. It sees fiscal fourth-quarter and full-year revenue topping analyst expectations and now expects full-year GAAP net income of $33.1 million. It had previously guided for $11 million in net income.

Although we saw customer pushouts of our products for silicon carbide devices due to slowing electric vehicle (EV) demand in the second half of our fiscal year, we still achieved another record year for annual revenue for Aehr,” CEO Gayn Erickson said.

Is Aehr stock a buy?

Aehr investors are understandably relieved to hear the guidance boost, but the risks facing the business aren’t going to fade overnight. Even if we’re now past the bottom, it could take time for trends to reverse and sales to accelerate.

Aehr has a solid business, but with the stock trading at 30 times earnings, a lot of future growth is built into the price. Given the uncertainty about growth right now, investors would be wise to think twice before rushing to buy into this rally.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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