Deutsche Bank on Thursday initiated coverage of chip-gear maker MKS Instruments (MKSI) with a buy rating and price target of 84.
MKS shares were unchanged at 68.15 on the stock market today. The stock is 11% below its 50-day moving average, a key technical trading level, and 23% below its all-time high of 88.40, reached on June 9.
"MKS Instruments has been a reliable component and subsystem supplier to the semiconductor equipment market, but through (mergers), it has transformed into a more balanced and diversified supplier of process control technology by end markets and by customers," Deutsche analyst Sidney Ho said in a note to clients. "We believe the Street underestimates the company's ability to drive margin expansion and deleverage its balance sheet."
With its April 2016 acquisition of Newport, MKS now gets about half its revenue from non-semiconductor markets, Ho said.
Merger activity heated up in the semiconductor capital equipment market this week, with Advanced Energy Industries (AEIS) and Brooks Automation (BRKS) announcing acquisitions.
Advanced Energy Industries announced Wednesday that it acquired Excelsys Holdings for 15.5 million euros, or $17.7 million. Based in Ireland, Excelsys generated revenue of 10.2 million euros, or $11.6 million in 2016. The deal is expected to be immediately accretive to earnings.
"We like the acquisition of Excelsys, as it extends (the) AEIS specialty power product portfolio into industrial markets worldwide, and the deal valuation seems reasonable," Needham analyst Edwin Mok said in a report. He rates Advanced Energy stock as buy with a price target of 80.
IBD'S TAKE: The IBD 50 list of top-performing growth stocks now includes three chip-gear makers: Applied Materials, Ichor Holdings and Lam Research.
Advanced Energy slipped 0.7% to 65.34 Thursday.
Brooks Automation announced Wednesday that it has acquired Pacific Bio-Material Management, a provider of storage and cold-chain logistics for biological sample materials. Brooks paid $33 million in cash for Pacific Bio-Material, which is headquartered in Torrance, Calif.
Brooks is a worldwide provider of automation and cryogenic solutions for multiple markets including semiconductor manufacturing and life sciences.
Also Wednesday, Stifel upgraded shares of chip-gear maker Teradyne (TER) to buy from hold and raised its price target to 39 from 32.
Teradyne was down 0.3%, near 30.80, at the close.
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