Camtek CAMT has been performing well, with its shares gaining 19.8% in 2024. Despite this surge, CAMT underperformed the Zacks Computer and Technology sector and the broader S&P 500’s return of 34.6% and 25.3%, respectively, over the same period.

Despite this relative underperformance, Camtek's strategic focus on high-performance computing (HPC) modules, advanced packaging and silicon carbide technologies underscore its potential for future growth.

The divergence in performance suggests that CAMT’s growth is driven more by specific strengths rather than broad market optimism. Camtek’s price performance is a testament to its market resilience and strategic focus.

Rising Demand for HPC Modules Aids CAMT

Camtek stands at the forefront of semiconductor inspection and metrology solutions, with a strong focus on HPC modules, advanced packaging and silicon carbide technologies. Its focus on the HPC segment positions it well to benefit from the ongoing boom in generative AI and advanced semiconductor manufacturing.

The semiconductor industry is poised for long-term growth, driven by the increasing adoption of AI, the proliferation of smart devices, and the expansion of data centers. Camtek is well-positioned to benefit from these trends as a leading provider of inspection and metrology solutions. The company’s ability to innovate and develop next-generation systems that cater to the evolving needs of the semiconductor industry, such as those involving micron-level interconnects and advanced packaging, will be crucial to sustaining its growth over the long term.

Camtek’s ongoing development of new-generation systems equipped with state-of-the-art sensors and optics positions the company to address both current and next-generation HPC-related products. This includes potential expansion into new market segments, such as Outsourced Semiconductor Assembly and Tests (OSATs), which are expected to implement packaging capabilities for HPC modules. As the industry evolves, CAMT’s ability to adapt and expand its product offerings will be a key driver of long-term growth.

Camtek has a track record of receiving a steady flow of orders. In the past year, CAMT has received several orders for its chiplet modules and high bandwidth memory (HBM). So far this year, CAMT has received multiple orders from tier-1 HBM manufacturers and OSAT providers.

Due to the steady flow of contracts, CAMT expects its 2024 revenues to be approximately $427 million. The Zacks Consensus Estimates for revenues is pegged at $426.98 million, indicating 35.4% year-over-year growth.

Camtek Price Performance Chart

Image Source: Zacks Investment Research

Near-Term Challenges for Camtek

Camtek’s revenue contribution from China has declined when compared to the previous years. This can be attributed to China’s recent focus on choosing materials and products from domestic producers. Camtek also operates in a highly competitive market with companies like Micron Systems MU, Intel INTC and Cadence Design Systems CDNS competing in the HBM space.

Micron recently rolled out its HBM3E, and Intel released its Sapphire Rapids HBM under the name, Intel Xeon CPU Max Series. On the other hand, Cadence has long been offering its HBM PHY IP. Camtek is also benefiting from the growth in demand for HBMs.

For Camtek, the HPC market is a major growth driver. However, Camtek faces constraints due to a lack of production capacity in 2.5D substrates causing a limited supply of HPC modules despite healthy demand. Camtek has also faced qualification challenges with one of its major customers in the HBM products. Further qualification issues like this can hamper relations with the client, forcing CAMT to focus on its remaining customers.

What Should Investors Do?

Despite the ongoing macroeconomic uncertainties, it would be wise for existing shareholders to hold on to the Camtek stock, given strong fundamentals and promising long-term growth prospects. However, for new investors looking to buy the stock, it might be prudent to wait for a more attractive entry point.

CAMT stock currently carries a Zacks Value Score of D, which means that its valuation is pushed to elevated levels, and a market correction or a period of consolidation could provide a better opportunity to invest in this high-quality stock.

Camtek carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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