Chicago, IL – April 17, 2025 – Today, Zacks Equity Research Equity are IPG Photonics IPGP and MicroVision MVIS.
Industry: Laser Systems
Link: https://www.zacks.com/
The Zacks Laser Systems and Components industry participants are suffering from challenging macroeconomic conditions globally. U.S. President Donald Trump’s decision to levy tariffs on trade partners, including China, Mexico and Canada, has increased the chances of recession. China is an important market for the industry participants.
Hence, a full-blown trade war between China and the United States doesn’t bode well for industry participants as higher tariffs are expected to hurt capital investment decisions. Nevertheless, industry participants like IPG Photonics and MicroVision are benefiting from upbeat demand from electric vehicles, electronics, semiconductors and healthcare end-markets. Robust demand for high-power continuous wave and pulsed lasers for cutting and battery-processing applications is the key catalyst.
The Zacks Laser Systems and Components industry comprises companies offering high-performance fiber lasers, fiber amplifiers and diode lasers, optical and photonic products, and scanning technology solutions. The key end markets are semiconductors, metrology, advanced communication and medical devices. Industry participants also provide high-precision 3D sensors and system products for inspection and metrology.
Moreover, in the medical devices space, laser and other energy-based aesthetic treatments can achieve therapeutic results by affecting structures within the skin. Developing safe and effective aesthetic treatments has resulted in a well-established market for these procedures. The industry also operates in the cyclical surface mount technology and semiconductor capital equipment markets.
Emerging Applications Driving Demand for Lasers: The industry is benefiting from increasing demand for emerging applications like additive manufacturing, facial recognition, gesture recognition, LiDAR applications and IoT. Advanced lasers, especially those with 3D sensing (3DS) capabilities, are enhancing interactions using technology. 3DS — the technology that allows users to create 3D printable objects, control games with body gestures, and measure objects — is in high demand.
Laser-IoT Combination Supports Efficiency: As industries are increasingly adopting automation techniques, combining lasers with IoT improves operating efficiency. IoT-supported manufacturing equipment is far easier to update with firmware. The combination reduces costs and increases flexibility and reliability manifold by enabling material-handling capabilities through remote sources. Strong demand from semiconductor and allied markets, which are seeing a rapid shift toward the production of micro and nano devices, is another positive for industry participants.
Challenging Macroeconomic Condition Hurts Prospect: Industry participants suffer from sluggish capital spending by original equipment manufacturers. Moreover, persistent inflation, energy headwinds in Europe and weakness in China are expected to hurt industry participants in the near term.
The Zacks Laser Systems and Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #202, which places it in the bottom 18% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are pessimistic about this group’s earnings growth potential. Since Nov. 30, 2024, the Zacks Consensus Estimate for the industry’s earnings estimate for 2025 has declined 95% to 7 cents per share.
Given the dim industry outlook, there are only a few stocks worth watching in the industry. But before we present the top industry picks, it is worth looking at the industry’s shareholder returns and current valuation first.
The Zacks Laser Systems and Components industry has underperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has declined 20% over this period compared with the S&P 500’s return of 8.1% and the broader sector’s growth of 4.7%.
On the basis of the trailing 12-month P/S, which is a commonly used multiple for valuing Laser Systems and Components stocks, we see that the industry is currently trading at 6.38X compared with the S&P 500’s 5.02X. It is trading below the sector’s trailing 12-month P/S of 6.49X.
Over the last five years, the industry has traded as high as 13.15X and as low as 4.87X, with a median of 7.2X.
IPG Photonics: This Oxford, MA-based Zacks Rank #3 (Hold) company is suffering from muted demand in its key end-markets, including industrial, general manufacturing, and e-mobility, as well as a cautious spending environment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IPG Photonics expects to benefit from the growing adoption of welding solutions in the electric vehicle and medical device end markets. The acquisition of cleanLASER enhances IPGP’s industrial cleaning capabilities. cleanLASER’s strong footprint in Europe also bodes well as it expands IPG Photonics’ footprint in industries such as automotive, aerospace, medical, food and other markets. The deal is expected to add $30 million in revenues in the first year of completion.
IPGP shares have dropped 26.6% year to date. The Zacks Consensus Estimate for 2025 earnings has declined a couple of cents to $1.44 per share over the past 30 days and indicates a 2.04% decline over 2024’s reported figure.
MicroVision: Redmond, WA-based MicroVision is a well-known provider of MEMS-based solid-state automotive lidar technology and ADAS solutions. The stock has declined 9.2% year to date.
MicroVision’s diversified portfolio is a key catalyst. It offers multiple technology nodes with the highest resolutions and the smallest form factor LiDAR, with its MEMS-based long-range MAVIN and small form factor short-range sequential flash-based MOVIA LiDAR product lines.
In automated guided vehicles, and autonomous mobile robots space, MicroVision’s MOVIA LiDAR product with perception has generated significant attention, which is expected to boost top-line growth over the long term.
The Zacks Consensus Estimate for MVIS’ 2025 loss has been pegged at 41 cents per share. MicroVision currently has a Zacks Rank #3.
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