What Happened:
Shares of semiconductor quality control company Nova (NASDAQ:NVMI) fell 8.8% in the afternoon session after Citigroup analyst Atif Malik downgraded the stock's rating from Buy to Neutral and lowered the price target from $273 to $224. Malik cites a shift in preference for consumables (Like Entegris, which produces special chemical items used in the semiconductor manufacturing process) and wafer start stocks (companies that produce raw materials, including wafers for chip production) over equipment manufacturers like Nova. Despite seeing Nova as a key player in the growing 3D devices market and benefiting from advanced packaging, he is concerned about the sustainability of its performance due to weaker wafer fab equipment (WFE) spending in 2025.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Nova? Access our full analysis report here, it’s free.
What is the market telling us:
Nova’s shares are quite volatile and over the last year have had 14 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 7 months ago, when the stock gained 7.5% on the news that the company reported fourth-quarter results that blew past analysts' revenue and EPS expectations, driven by outperformance in its key operating segments (Products and Services). In addition, its inventory levels shrunk, and its gross margin improved year on year.
Looking ahead, Nova's revenue and EPS guidance for Q1 2024 beat expectations. Overall, this was a fantastic quarter that should have shareholders cheering.
Nova is up 39.5% since the beginning of the year, but at $189.27 per share it is still trading 22.6% below its 52-week high of $244.49 from July 2024. Investors who bought $1,000 worth of Nova’s shares 5 years ago would now be looking at an investment worth $5,963.
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