Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Independent Insight Provider, Japanese equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>Advantest has dropped back 11.5% from its recent high but is still up 43% year-to-date and up 2.3X from a year ago. Consolidation is likely to continue.</li>
<li>Demand for High Bandwidth Memory (HBM) for use with AI processors could lift sales, profits and profit margins to new highs within the next two years.</li>
<li>That could bring the projected P/E ratio down from 75.5x FY Mar-24 EPS guidance to 31x FY Mar-26 EPS in a favorable but not unreasonably optimistic scenario. </li>
</ul>


Advantest has dropped back 11.5% from its recent high but is still up 43% year-to-date and up 2.3X from a year ago. Consolidation is likely to continue.
Demand for High Bandwidth Memory (HBM) for use with AI processors could lift sales, profits and profit margins to new highs within the next two years.
That could bring the projected P/E ratio down from 75.5x FY Mar-24 EPS guidance to 31x FY Mar-26 EPS in a favorable but not unreasonably optimistic scenario. 


Advantest (6857 JP): AI Speculation Discounted

Japan Specialist

Mark Chadwick

<ul>
<li>Advantest reported strong Q3 results, driven by robust demand for memory testers</li>
<li>The company raised its full-year guidance for revenue and operating profit to inline with analyst estimates</li>
<li>Advantest’s stock price remains overvalued on AI-hype. We remain bearish with a potential downside of 25%.</li>
</ul>


Advantest reported strong Q3 results, driven by robust demand for memory testers
The company raised its full-year guidance for revenue and operating profit to inline with analyst estimates
Advantest’s stock price remains overvalued on AI-hype. We remain bearish with a potential downside of 25%.


Advantest (6587) | Testing the Limits of AI

Equity Long-Short, Semiconductors, Fabricated Knowledge

Douglas O'Laughlin

Equity Long-Short, Semiconductors

Fabricated Knowledge

Learn more about the world's most important manufactured product. Meaningful insight, timely analysis, and an occasional investment idea.

Thematic (Sector/Industry)

<ul><li>Japan is the darling of the moment. To those who haven’t kept track of the story, a series of <a href="https://www.jpx.co.jp/english/equities/improvements/follow-up/b5b4pj000004yqcc-att/dreu250000000uqc.pdf" target="_blank" rel="noopener">market reforms in January</a> encourages companies with a price-to-book ratio below one to create a plan to achieve capital efficiency.</li><li>Given that half of the companies at the time were trading below 1x P/B, this is a big deal.</li><li>And this has driven a massive wave of buybacks and changes, leading to the Nikkei finally breaking a 30-year high.</li></ul>

Japan is the darling of the moment. To those who haven’t kept track of the story, a series of market reforms in January encourages companies with a price-to-book ratio below one to create a plan to achieve capital efficiency.Given that half of the companies at the time were trading below 1x P/B, this is a big deal.And this has driven a massive wave of buybacks and changes, leading to the Nikkei finally breaking a 30-year high.

Japanese Semiconductor Stocks and AI "Winners" that Ain't So

<ul>
<li>Advantest's stock has doubled in the past two months, outperforming even Nvidia, indicating a potential peak in momentum</li>
<li>Near term technical indicators suggest the stock could be running out of steam, with few catalysts ahead of July Q1 earnings</li>
<li>The stock is trading at a significant premium to Japanese-listed SPE peers and its historical EV/EBIT multiple of 15x</li>
</ul>


Advantest's stock has doubled in the past two months, outperforming even Nvidia, indicating a potential peak in momentum
Near term technical indicators suggest the stock could be running out of steam, with few catalysts ahead of July Q1 earnings
The stock is trading at a significant premium to Japanese-listed SPE peers and its historical EV/EBIT multiple of 15x


Advantest (6857) | Time to Cash in the Chips?

<ul>
<li>Advantest is highly geared to changes in sales, with average contribution margins of 36% and 51% at the gross and operating profit levels, respectively.</li>
<li>This works on the downside as well as the upside, something that has perhaps not received sufficient attention as optimists imagine a repeat of the recent extraordinary up-cycle.</li>
<li>The share price is down 19% from its July 18 high, but at the top of its 5-year P/E range even vs historical peak EPS.</li>
</ul>


Advantest is highly geared to changes in sales, with average contribution margins of 36% and 51% at the gross and operating profit levels, respectively.
This works on the downside as well as the upside, something that has perhaps not received sufficient attention as optimists imagine a repeat of the recent extraordinary up-cycle.
The share price is down 19% from its July 18 high, but at the top of its 5-year P/E range even vs historical peak EPS.


Advantest (6857 JP): High Gearing on the Downside

Japan

ADVANTEST CORPORATION produces semiconductor testing devices and electronic measuring instruments.  The Company's products include large-scale integration (LSI) test systems, memory test systems, dynamic test handlers, network analyzers, electronic meters, optical testing devices, and signal sources.

Advantest Corp (6857 JP)

Advantest (6857 JP): AI Speculation Discounted

Cyclical recovery accelerated by demand for High Bandwidth Memory testers should take sales and profits to new highs, but this has been largely...

Scott Foster

Advantest (6587) | Testing the Limits of AI

Advantest's Q3 results were strong due to high demand for memory testers. The company raised its full-year guidance. The stock price is overvalued...

Mark Chadwick

Japanese Semiconductor Stocks and AI "Winners" that Ain't So

Another BSPDN name and some ABF ideas. Not every AI semiconductor stock is actually winning. This edition just so happens to be Japan focused

Fabricated Knowledge

Advantest (6857) | Time to Cash in the Chips?

Advantest closed today -10% today (Aug 25, 203) after Nvidia failed to hold on the gains overnight and as US rates spurred a tech sell off. 10%...

Mark Chadwick

Advantest (6857 JP): High Gearing on the Downside

1Q results show high gearing on the downside: IC test operating profit down 55%, other segment profits zero. NP down 75%. Further weakness ahead...

Scott Foster

Advantest (6857 JP): AI Speculation Discounted

Cyclical recovery accelerated by demand for High Bandwidth Memory testers should take sales and profits to new highs, but this has been largely...

Scott Foster

Advantest (6587) | Testing the Limits of AI

​Advantest's Q3 results were strong due to high demand for memory testers. The company raised its full-year guidance. The stock price is overvalued...

Mark Chadwick

Japanese Semiconductor Stocks and AI "Winners" that Ain't So

Another BSPDN name and some ABF ideas. Not every AI semiconductor stock is actually winning. This edition just so happens to be Japan focused

Fabricated Knowledge

Advantest (6857) | Time to Cash in the Chips?

Advantest closed today -10% today (Aug 25, 203) after Nvidia failed to hold on the gains overnight and as US rates spurred a tech sell off. 10%...

Mark Chadwick

Advantest (6857 JP): High Gearing on the Downside

1Q results show high gearing on the downside: IC test operating profit down 55%, other segment profits zero. NP down 75%. Further weakness ahead...

Scott Foster

Advantest's Q3 results were strong due to high demand for memory testers. The company raised its full-year guidance. The stock price is overvalued...