Is the sky the limit for AEM share price? Amid the COVID-19 outbreak, the technology sector is going through an up-cycle due to surging demand for electronic products as many people are forced to work from home. AEM share price is one of the beneficiaries of the sector rally and is currently enjoying a superb bull run.
Through the years, I had covered a number of SGX-listed technology companies in this blog. So far, I had been hesitant to cover AEM share price because of my lack of understanding of the semiconductor industry. This industry is notorious for having an extremely short lifespan and trying to analyse companies operating in this segment on a long-term basis is always challenging. In this article, I will share my views on whether the red-hot form of AEM share price is sustainable.
As a matter of fact, AEM share price is now trading at record high of $2.60. This counter used to trade at the $6.00 bandwidth. Following the bonus issue of three-for-one shares exercise in March 2018, AEM share price fell off the cliff. But if investors had kept faith with the management, they would be laughing their way to the bank now.
Indeed, the explosive surge of AEM share price had also caught the eyes of the big boys and led to them increasing their stakes in the semiconductor handling solutions service provider. On 6 April 2020, Mitsubishi UFJ Financial Group increased its stake in AEM from 5.7% to 6.4%. The buoyant performance of AEM share price was in part due to the recent announcement of a set of stellar first quarter FY2020 financial report.
Another factor for the raging form of AEM share price is the aggressive shares buyback by the Group in recent months. As of 20 March 2020, 2.6 million shares had been repurchased by the management. With a market valuation of $600 million, AEM is considered a mid-size cap in SGX. But if AEM share price continues its current form, reaching the billion-dollar milestone is not a far-fetched target.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. As of 11 May 2020, I am vested in this counter (holding 10,000 shares at $3.35).
AEM share price in high heavens
It is not difficult to understand why AEM share price spiked in recent weeks. While COVID-19 pandemic has upended aviation, oil and gas sector and tourism sectors, the technology sector had emerged as the biggest winner out of this once-in-a-century disaster as companies adopt technologies in their business practices. As a result of the buoyant demand, the AEM achieved a record revenue of $323 million for FY2019, a 23.2% increase compared to that of FY2018.
AEM share price continued to roar ahead in May 2020 as it reported a stunning 1QFY2020 business update that saw profit jumped by a whopping 449%. Revenue increased 179% to reach $146 million while net profit margin surged to 24.6%. It appears to me that the COVID-19 turns out to be a blessing in disguise for AEM share price.
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