AEM share price to rocket to $5.00?

Sign up & unlock articles! Will AEM share price fulfil its destiny as the King of Technology Stock in SGX? AEM share price has been in buoyant mood in the past week, soaring by as high as 17% on 21 July 2020. Admittedly, the rise has not been linear as AEM share price experienced some loss of form in June.

The upcoming 1H financial result must have given a boost to AEM share price as investors bought ahead of the earning release. Many analysts had hyped up AEM share price and re-rated the target price following the strong growth in electronics sector amid the COVID-19 outbreak.

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AEM share price

As the purported key supplier for Intel, AEM share price had ridden on the growth of the US semiconductor company in recent years. It’s competitive edge lies in its first-mover advantage of its test equipment for Intel in 2016 – High Density Modular Test (HDMT) semiconductor test handler platform. The volume ramp and higher sales led to surging run of AEM share price for the past four years.

Much ink has been spilled on the need for AEM to diversify its customer base and reduce its reliance on Intel (about 94% or $303 million of its revenue came from Intel). Question now is: will AEM share price rocket to the moon with Qualcomm, which is a potential client? Of course, the possibility of winning a contract with Qualcomm is just my pure speculations and there is no signs or sources pointing to a contract win with Qualcomm. But I think the scenario of a partnership could be worth pondering.

According to Statista, Qualcomm accounted for 40% of global smartphone processor applications revenue in the first quarter of 2020. This means that the smartphone chip test market is a huge untapped market for AEM. While Intel is a market leader in chips used in computers, Qualcomm is a leader in smartphone chips. Thus, the key for AEM share price to surge to another record high should be winning a contract with Qualcomm.

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 AEM shares at $3.35).

AEM share price in cusp of glory

For AEM share price to hit $5.00, the risk of relying too much of its revenue on Intel must be addressed. Thus, it is pertinent that AEM diversify its revenue sources. The potential capture of Qualcomm will be an important missing piece to the jigsaw for AEM. To achieve this, efforts must be expedited to integrate the capabilities of Mu-Test (acquired in March 2020) with its existing AMPS platform (AMPS is a test equipment designed for AEM’s non-intel customers).

There are signs that Qualcomm [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: July 22, 2020 — 11:57 am

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