ORBK Stock: Gaining From the Megatrends

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Orbotech Stock Has Many Growth Catalysts

Today’s stock relates to another of our favorite methods of investing in growth stocks. The “picks and shovels” method implies investing in stocks of companies that provide products or services to other companies involved in prevailing trends. Investors stand to gain superlative returns if they consider these stocks for the long term.

Case in point: Orbotech Ltd (NASDAQ:ORBK), which is a leading global supplier of cutting-edge solutions for the manufacture of electronic products. Its technologies are used in the manufacturing of the world’s most advanced consumer and industrial products throughout the electronics and adjacent industries.

Orbotech systems are used to produce virtually every electronic device in the world.

The company provides cutting-edge technologies for use in the manufacture of printed circuit boards (PCBs), flat panel displays (FPDs), and semiconductor devices (SDs). These solutions are used in the production of next-generation electronic products.

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The breadth and reach of Orbotech’s technologies can be gauged from a recent piece of news. Orbotech announced today that LG Display Co., Ltd. (ADR) (NYSE:LPL) has ordered multiple “Quantum” automated optical inspection (AOI) solutions for its new flexible OLED display “Gen 6” line. The future looks good for ORBK stock. (Source: “Orbotech Solutions Selected by LG Display for New Flexible OLED Display Gen 6 Production Line,” Orbotech Ltd, February 14, 2018)

LG Display is a leading innovator of display technologies, and Orbotech products will be used for its flexible mobile device display production. Delivery of the products is expected to be in the first and second quarter of 2018.

The president of Orbotech Pacific Display, Edu Meytal, said that the repeat order from LG Display is evidence of the high quality of Orbotech’s solutions.

With the rising megatrends of connectivity, artificial intelligence (AI), smart vehicles, high-performance computing, augmented reality (AR), virtual reality (VR), etc., there are huge opportunities for Orbotech stock to grow.

Orbotech’s technologies are deployed from high-end mobile devices to smart vehicles and are in demand from large-area FPDs such as large-size LCD televisions and OLED displays.

The Internet of Things (IoT) is expected to be a primary growth driver in the near term, which will create new opportunities for semiconductor devices and printed circuit boards. As per a forecast by Gartner, Inc., 20.4 billion connected things will be in use worldwide by 2020. (Source: “Gartner Says 8.4 Billion Connected “Things” Will Be in Use in 2017, Up 31 Percent from 2016,” Gartner Inc, February 7, 2017)

Orbotech is well-positioned to capitalize on such new opportunities. As the demand for connectivity, smartphones, OLED, AR, VR, and other applications increases, the demand for Orbotech’s tools and solutions should keep rising, which bodes well for Orbotech stock.

The company announced preliminary fourth-quarter and fiscal-year 2017 results last month, and it updated its full-year 2018 guidance. Revenue is expected to be about $256.0 million for the fourth quarter, with gross margin likely to be in the range of 47% to 47.5%. (Source: “Orbotech Announces Preliminary Fourth Quarter And Fiscal Year 2017 Results,” Orbotech Ltd, January 17, 2018)

CEO Asher Levy commented that the company offers “unique solutions to the manufacturing processes for the world’s most advanced consumer and industrial electronic products.” He added that “the recent introductions of new products and technologies is resulting in stronger revenue momentum and improved visibility” in 2018. (Source: Ibid.)

The improving performance has had a positive impact on ORBK stock. The following chart shows this phenomenal rise. Orbotech stock has gained more than 400% in the last five years and over 50% over the last year.

orbotech stock chart

Chart courtesy of StockCharts.com

Analyst Take

As Orbotech announces its fourth-quarter and full-year 2017 results today, investors will have good reason to consider this picks-and-shovels stock. The company is helping shape the future of electronics, and it should benefit immensely from the adoption of new technologies in the industries that it serves.

Over the past three years, Orbotech has become a stronger and more diversified company and less vulnerable to short-term industry cycles. The prevailing trends in smart mobile devices, automotive electronics, flexible applications and devices, IoT, etc. are likely to drive the demand for the company’s products higher. Investors could consider Orbotech stock on dips.