Ichor Holdings Ltd: Ignored 5G Stock up 34% in 2021 & Just Getting Started

ICHR stockIchor Holdings Ltd Reports Record Revenue, Strong Earnings

Ichor Holdings Ltd (NASDAQ:ICHR) is an overlooked 5G stock that has been outpacing the market over the last six months. Since September 11, 2020, Ichor stock has almost doubled to $41.65.

ICHR stock has been particularly bullish in 2021. On February 8, the stock hit a new all-time intraday high of $43.34, for a year-to-date gain of 40.5%. Since then, Ichor stock has given up some short-term ground to well-deserved profit-taking.

Why the strong investor sentiment? In addition to 5G stocks getting a lot of attention, ICHR stock has benefited from strong fourth-quarter financial results. In spite of ongoing uncertainty and volatility related to COVID-19, Ichor Holdings Ltd reported its seventh consecutive quarter of revenue growth.

Not only that, but thanks to business conditions strengthening, the company’s fourth-quarter revenue came in at the high end of guidance.  Moreover, management provided strong guidance for the first quarter of 2021.

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ICHR Stock Overview

Ichor Holdings is a global leader in designing and manufacturing advanced fluid and gas delivery systems for semiconductor equipment that’s critical to 5G. The company’s primary offerings include gas and chemical delivery subsystems, collectively known as fluid delivery subsystems. (Source: “Home Page,” Ichor Holdings Ltd, last accessed February 11, 2021.)

Ichor’s gas delivery subsystems deliver, monitor, and control precise quantities of the specialized gases used in semiconductor manufacturing processes.

The company’s chemical delivery subsystems precisely blend and dispense the reactive liquid chemistries used in semiconductor manufacturing processes such as chemical-mechanical planarization, electroplating, and cleaning. (Source: “Ichor Holdings, Ltd. Announces Fourth Quarter and Fiscal Year 2020 Financial Results,” Ichor Holdings Ltd, February 2, 2021.)

Ichor Holdings Ltd also manufactures certain components for internal use in fluid delivery systems and for direct sales to its customers.

Two of Ichor’s biggest customers are 5G semiconductor giants Lam Research Corporation (NASDAQ:LRCX) and Applied Materials, Inc. (NASDAQ:AMAT).

Strong Q4 Results Trump Forecasts

On February 2, Ichor Holdings Ltd announced that its revenue for the fourth quarter ended December 31, 2020 increased 29% year-over-year to $245.0 million. (Source: Ibid.)

The company’s fourth-quarter net income was $12.5 million ($0.51 per share), a 57.5% increase over the fourth-quarter 2019 net income of $7.9 million ($0.35 per share). Its adjusted net income was $19.8 million ($0.81 per share), compared to fourth-quarter 2019 adjusted net income of $10.9 million ($0.48 per share).

Ichor’s cash flow from operations was $40.0 million and its free cash flow was $38.0 million. During the fourth quarter, the company strengthened its balance sheet through an equity offering with net proceeds of $139.0 million. Along with cash generated by the business, Ichor Holdings Ltd ended the fourth quarter with total cash of $253.0 million.

“While 2020 was an incredibly challenging year in so many ways, we are very pleased to report record revenues and strong growth relative to the overall industry,” said Jeff Andreson, CEO. (Source: Ibid.)

The company’s full-year revenue was up 47%, at $914.0 million, while its full-year net income increased 210% to $33.2 million ($1.42 per share). Its 2020 adjusted net income was $59.0 million ($2.51 per share), a 108% increase over the 2019 adjusted net income of $28.3 million ($1.25 per share).

For the first quarter of 2021, Ichor Holdings Ltd expects to report:

  • Revenue in the range of $245.0 to $265.0 million, compared to $220.0 million in Q1 2020
  • Earnings per share in the range of $0.46 to $0.58, compared to $0.15 in Q1 2020
  • Adjusted earnings per share in the range of $0.64 to $0.76, compared to $0.52 in Q1 2020.

Analyst Take

Ichor stock is a smaller, overlooked 5G stock that should be on investors’ radar in 2021.

The company reported strong full-year financial results, it has a rock-solid balance sheet, and business conditions continue to strengthen. As a result, Ichor Holdings Ltd expects its momentum to continue in 2021.