Breakout brewing in ACM Research ahead of its earnings

Key Points

• ACM Research (ACMR) has shown remarkable outperformance in the past three months, with a nearly 43% increase despite a declining overall market.
• The stock is maintaining an uptrend with support of its 50-day Simple Moving Average (SMA) as it approaches key catalysts.
• The company's recent earnings exceeded expectations, and analysts are predicting further upside with a consensus price target of $20.32 ahead of its earnings release.

While the overall market appears to be breaking lower after the SPDR S&P 500 ETF Trust NYSE: SPY took out a critical level of support on Wednesday, many might focus on risk-off, deep out-of-the-money limit orders to purchase at a discount,  and potential short opportunities.

However, one name that has so far bucked the trend ahead of key upcoming catalysts is ACM Research NASDAQ: ACMR. ACMR has significantly outperformed its sector and overall market over the past three months, up almost 43%. Year-to-date, the stock has surged close to 136%.

As the stock holds firm in its uptrend, with its contracting range pointing toward a possible expansion and momentum move, it’s worth taking a deep dive into this company to explore the opportunities.

What is ACM Research?

ACM Research and its subsidiaries specialize in developing and selling advanced single-wafer wet cleaning equipment to improve manufacturing processes and global chip yield. 

They offer innovative technologies such as space alternated phase shift for uniform megasonic energy delivery, timely energized bubble oscillation for cleaning patterned wafers, Tahoe technology for reduced chemical usage, and electro-chemical plating for advanced metal plating. The company sells its products under the Ultra C brand through direct sales and third-party representatives.

It’s important to note that ACMR is a small-cap stock with a market cap of $1 billion. Its market cap, 52-week range of $5.85 - $21.07, and average daily volume of under 1 million shares contribute to increased volatility, spread, and potential lack of liquidity. For active traders, a stock like this might be difficult to manage risk effectively.

The Technical Setup in ACMR

As the range further contracts ahead of key upcoming catalysts, the 50-day Simple Moving Average (SMA) continues to support the uptrend. As long as the stock can continue to base above this key level of support, the uptrend will remain intact, and bulls should continue to have confidence.

However, if the stock breaks below this level and fails to reclaim, a momentum shift might occur, and profit-taking could begin to take over.

Going forward, though, if the stock can break out of the range and experience an uptick in volume, a breakout to the upside would be confirmed. Its most recent pivot-high of $21.07 is likely the first target.

ACMR Earnings and Upcoming Catalysts

The company’s most recent earnings report, released on August 4th, 2023, revealed earnings of $0.45 per share for the quarter, significantly surpassing expectations by $0.38. The company also exceeded revenue estimates, with $144.58 million in earnings compared to the anticipated $113.32 million. Their trailing twelve-month earnings per share stand at $1.02, with a price-to-earnings ratio 17.9. Looking ahead, ACM Research is expected to experience a 2.68% earnings growth in the next year, increasing from $1.12 to $1.15 per share. 

On October 19, ACMR announced that it will provide a preliminary revenue range for the third quarter of 2023 before the U.S. market opens on October 27. This coincides with the reporting obligations of its subsidiary, ACM Research (Shanghai), Inc., to the Shanghai Stock Exchange. 

The full financial results for the third quarter of 2023 will be released on November 7, and a conference call to discuss the results will take place at 8:00 a.m. U.S. Eastern Time. 

Analysts See Further Upside

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Given the stock's performance on the year, up triple-digits, it’s undoubtedly a significant vote of confidence for investors to see that analysts are still predicting a double-digit upside.

ACMR has a Moderate Buy rating based on five analyst ratings and a predicted upside of 11.59% based on a consensus price target of $20.32. 

Most recently, on October 12, the Goldman Sachs Group boosted its target from $16.20 to $18.20.