Susquehanna Upgrades Advanced Energy Industries (AEIS) to Positive

Susquehanna upgraded Advanced Energy Industries (NASDAQ: AEIS) from Neutral to Positive with a price target of $35.00 (from $22.00), saying execution and restructuring leading to higher earnings power.

Analyst Mehdi Hosseini commented, "We are upgrading AEIS from a Neutral to Positive rating as we introduce our CY16/CY17 (ex. Solar Inverter) earning estimates of $2.60/$2.65. Our price target has also increased from $22 to $35, or 12x CY16 EPS plus net cash. Our upgrade is based on: (1) continued execution in divesting (the money-losing) Solar Inverter business, (2) diversifying into Industrial and scaling the Services business, and (3) increasing TAM as 3D NAND capacity adds takes off (albeit at a moderate pace), enabling AE (via its exposure to Etch/ALD) to increase WFE TAM from 0.4% in 2012 to 1% today. We also highlight increased emphasis on FCF generation; net cash currently accounts for 13% of MC and we estimate the company to drive FCF margin of at least 20% per year over the next few years given the leaner business model. This compares to FCF margin of 10% in 2014 and 5% in 2013. Some of this cash could be used for accretive acquisitions, particularly in the Industrial segment."

For an analyst ratings summary and ratings history on Advanced Energy Industries click here. For more ratings news on Advanced Energy Industries click here.

Shares of Advanced Energy Industries closed at $24.95 yesterday.

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