IPG Photonics Shines Bright with 21% Jump: Anticipated Surge in Laser Demand for Electric Vehicles Drives Investor Optimism

 

A "Fiery flash" is a descriptive term that we use to describe a sudden, intense burst of flame or light – or strongly rising stock price –, while we also consider the opposite, a sudden, intense absence of light or warmth – or strongly declining stock price.

The shares of Nasdaq listed company, IPG Photonics jumped up 21% this week, resulting in a solid 42% increase since the start of the year. IPG Photonics is a company that specializes in making really cool lasers. You know how in movies or cartoons, there are lasers that shoot out of futuristic guns or light up the sky? Well, IPG Photonics makes lasers like that in real life! These lasers are used in many different ways. Some lasers are used in factories to cut and shape materials like metal or plastic with incredible precision. Others are used in medical devices to help doctors perform surgeries or treat diseases. IPG Photonics' laser systems are known for their high performance and reliability.

Just over a month ago, the company published financial results that were deemed weak due to a decline in both revenue and operational performance compared to the previous year. However, it is worth noting that these results still managed to surpass the expectations of financial analysts. The company stated that 2022 had been a challenging year due to various factors, including the ongoing impacts of the pandemic, geopolitical conflicts, inflation, the effects of sanctions on their Russian operations, and the strength of the U.S. dollar. However, the outlook for 2023 appears more favorable as the company highlighted strong bookings despite macroeconomic challenges. To demonstrate confidence in their stock, the company's Board of Directors authorized a share repurchase program worth $200 million, equivalent to approximately 3.5% of the company's stock.

In recent days, the company enjoyed rating upgrades from several brokerage firms. These upgrades were based on the belief that IPG Photonics would benefit from investments made by battery manufacturers to expand their production capacity in response to the increasing demand for electric vehicles. Additionally, IPG Photonics' competitor, Coherent, experienced a significant increase in its share price after announcing a new laser subsystem tailored for electric vehicle manufacturing. As China is a large export market for IPG Photonics, with about 34% of sales to customers in China, it is indirectly exposed to the fiscal and financial policy support within the contrary. In the past week it seems China is increasing its efforts to support the economy.

Interestingly, we had a meeting with the Japanese conglomerate Panasonic earlier this week, which is not only renowned for its consumer products, but is also one of the leading manufacturers of electric vehicle batteries. Since 2010, Panasonic has been a key battery supplier to Tesla, and they collaborated on developing the first-generation lithium-ion battery for the Tesla Roadster. Presently, Panasonic is the primary battery supplier for Tesla's Model S, Model X, and Model 3 vehicles. During our meeting, Panasonic confirmed the notion that battery manufacturers are racing to establish new production facilities to meet the growing demand. Adding to the complexity, different governments consider it strategically important to bolster their own battery production capabilities. the thesis that manufacturers in the industry would require more lasers appears plausible given the circumstances.