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I last wrote about Nova ((NVMI - Free Report) ) as the Bull of the Day in August of last year when you could still buy shares for $120.
I thought investors should buy those levels ahead of NVIDIA ((NVDA - Free Report) ) earnings later in the month. I was right, but not without a Sep-Oct market swoon that took NVMI shares back to $90.
Since then, Nova rode a wave of semiconductor market success all the way to $247, supported by its double-digit sales and profit growth.
This year's top line consensus calls for 25% growth to $647 million and the bottom line is expected to cash in at EPS of $6.39 for a 31.5% advance.
Steady Upside Surprises and Rising Growth
Will Nova be able to repeat this year's phenomenal growth? We can't be sure, but analysts are already leaning in that direction with next year's top line looking for 18% growth to $765 million while the profit projection calls for a 14% advance to $7.28.
So the past year is a tale of two types of investors: those who didn't understand Nova's key role in an exploding demand market, and those like me who knew better and took their eye off the ball.
Let me share what I wrote last year so you see how Nova was set for lift-off...
What's Ahead for NOVA as Semiconductor Lieutenant?
Nova is a key provider of semiconductor manufacturing and measurement technologies known as metrology. They serve dozens of high-tech industries including automotive, robotics, cloud services, smart energy grids, and even AR/VR.
We'll look at the growth opportunities for NOVA in an area called the "trailing node" right after we get to understand their core evolution.
NOVA LTD, formerly known as Nova Measuring Instruments, is based in Rehovot, Israel.
Here's how the company describes their mission...
Nova's advanced multidisciplinary dimensional metrology technologies combine complex opto-mechanical hardware with advanced optics and cutting-edge algorithms to continuously innovate for effective process control throughout the semiconductor fabrication life cycle.
Where Does NVMI Fit In the Semi/AI Ecology?
Metrology is the science of measurement and nowhere is precision more needed than in the "nanosphere" of chip manufacture. A nanometer (nm) is one billionth of a meter, and this is the distance of measurement for engineering transistors onto an integrated circuit (IC) board or card.
Chips have been plunging below 10nm for the past few years as Moore's Law gets new life from GPU pioneers like NVIDIA. For comparison, the coronavirus is about 50nm.
I explained some of this in my Top Stock Picks video about Nova on Tuesday, where I also suggested that this little engineer of Semi precision and purity may be an acquisition target for larger wafer fabrication equipment (WFE) companies like Applied Materials ((AMAT - Free Report) ), Lam Research ((LRCX - Free Report) ) or KLA.
For less than $10 billion, any of these $50-100 billion Semi engineers could "bolt-on" Nova and secure their dominance in precision purity manufacturing.
What is the Trailing Node?
Last year, I also wrote an article on Global Foundries (GFS), the US-based semi "fab" operator. Ironically, the creation of GFS was borne in 2008 of a spin-off where Advanced Micro Devices ((AMD - Free Report) ) decided it didn't want to do the foundry work anymore on its own chip designs.
Here's an important excerpt relevant to NOVA...
Nodes in semiconductor manufacturing indicate the features that a node production line can create on an integrated circuit, such as interconnect pitch, transistor density, transistor type, and other new technology.
This is especially important as the "leading edge" of chip design focuses on the sub-10 nanometer transistor architecture that also places new demands on the "trailing edge" that has to be able to "connect and keep up!"
WFE Demand Historically Driven By Leading Edge and Memory
Semiconductor analyst Mark Lipacis described the industry dynamics last year, even in the midst of AI-GPU mania that exceeded his expectations...
"Historically, WFE demand was primarily driven by leading-edge logic chips like CPUs in PCs, processors used in datacenters or application processors and modems used in cellphones, led by most advanced logic and increasingly smaller and cheaper memory solutions. Consequently, ~80% of WFE spend was driven by leading edge logic and memory."
Trailing Node as a New Driver of WFE, Driven by an IoT Computing Era
Lipacis continues...
"We've argued that the industry has entered the '4th Tectonic Shift to an IoT Computing Era,' where for the first time in history, the volume computing device, IoT, requires trailing node instead of the leading-edge chips required by previous computing eras, like handsets and PCs."
Bottom line: Nova plunged to $160 on the August 5 Bank of Japan panic and then recovered above $235 after its August 8 "beat-and-raise" earnings report. I would look to be a buyer above $160 during this fall classic market sell-off.
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I last wrote about Nova ((NVMI - Free Report) ) as the Bull of the Day in August of last year when you could still buy shares for $120.
I thought investors should buy those levels ahead of NVIDIA ((NVDA - Free Report) ) earnings later in the month. I was right, but not without a Sep-Oct market swoon that took NVMI shares back to $90.
Since then, Nova rode a wave of semiconductor market success all the way to $247, supported by its double-digit sales and profit growth.
This year's top line consensus calls for 25% growth to $647 million and the bottom line is expected to cash in at EPS of $6.39 for a 31.5% advance.
Steady Upside Surprises and Rising Growth
Will Nova be able to repeat this year's phenomenal growth? We can't be sure, but analysts are already leaning in that direction with next year's top line looking for 18% growth to $765 million while the profit projection calls for a 14% advance to $7.28.
So the past year is a tale of two types of investors: those who didn't understand Nova's key role in an exploding demand market, and those like me who knew better and took their eye off the ball.
Let me share what I wrote last year so you see how Nova was set for lift-off...
What's Ahead for NOVA as Semiconductor Lieutenant?
Nova is a key provider of semiconductor manufacturing and measurement technologies known as metrology. They serve dozens of high-tech industries including automotive, robotics, cloud services, smart energy grids, and even AR/VR.
We'll look at the growth opportunities for NOVA in an area called the "trailing node" right after we get to understand their core evolution.
NOVA LTD, formerly known as Nova Measuring Instruments, is based in Rehovot, Israel.
Here's how the company describes their mission...
Nova's advanced multidisciplinary dimensional metrology technologies combine complex opto-mechanical hardware with advanced optics and cutting-edge algorithms to continuously innovate for effective process control throughout the semiconductor fabrication life cycle.
Where Does NVMI Fit In the Semi/AI Ecology?
Metrology is the science of measurement and nowhere is precision more needed than in the "nanosphere" of chip manufacture. A nanometer (nm) is one billionth of a meter, and this is the distance of measurement for engineering transistors onto an integrated circuit (IC) board or card.
Chips have been plunging below 10nm for the past few years as Moore's Law gets new life from GPU pioneers like NVIDIA. For comparison, the coronavirus is about 50nm.
I explained some of this in my Top Stock Picks video about Nova on Tuesday, where I also suggested that this little engineer of Semi precision and purity may be an acquisition target for larger wafer fabrication equipment (WFE) companies like Applied Materials ((AMAT - Free Report) ), Lam Research ((LRCX - Free Report) ) or KLA.
For less than $10 billion, any of these $50-100 billion Semi engineers could "bolt-on" Nova and secure their dominance in precision purity manufacturing.
What is the Trailing Node?
Last year, I also wrote an article on Global Foundries (GFS), the US-based semi "fab" operator. Ironically, the creation of GFS was borne in 2008 of a spin-off where Advanced Micro Devices ((AMD - Free Report) ) decided it didn't want to do the foundry work anymore on its own chip designs.
Here's an important excerpt relevant to NOVA...
Nodes in semiconductor manufacturing indicate the features that a node production line can create on an integrated circuit, such as interconnect pitch, transistor density, transistor type, and other new technology.
This is especially important as the "leading edge" of chip design focuses on the sub-10 nanometer transistor architecture that also places new demands on the "trailing edge" that has to be able to "connect and keep up!"
WFE Demand Historically Driven By Leading Edge and Memory
Semiconductor analyst Mark Lipacis described the industry dynamics last year, even in the midst of AI-GPU mania that exceeded his expectations...
"Historically, WFE demand was primarily driven by leading-edge logic chips like CPUs in PCs, processors used in datacenters or application processors and modems used in cellphones, led by most advanced logic and increasingly smaller and cheaper memory solutions. Consequently, ~80% of WFE spend was driven by leading edge logic and memory."
Trailing Node as a New Driver of WFE, Driven by an IoT Computing Era
Lipacis continues...
"We've argued that the industry has entered the '4th Tectonic Shift to an IoT Computing Era,' where for the first time in history, the volume computing device, IoT, requires trailing node instead of the leading-edge chips required by previous computing eras, like handsets and PCs."
Bottom line: Nova plunged to $160 on the August 5 Bank of Japan panic and then recovered above $235 after its August 8 "beat-and-raise" earnings report. I would look to be a buyer above $160 during this fall classic market sell-off.