The Aixtron Series | Part 3: DCF and My Unhinged Price Target
Revenue build, 3 statement model, and valuation for finance nerds
Opinions are my own and do not represent past, present, and/or future employers. All content is based on public information and independent research. This newsletter is not financial advice, and readers should always do their own research before investing in any security. I am invested in the semiconductor industry. As of the date of this publication, I currently hold a long position in Aixtron SE (AIXA). Feel free to reach out at jasonschips@gmail.com.
hey guys.
Aixtron has had a good run since my first two posts. When I released my first post about Aixtron, they were €14. When I released my second post, they were €17. Today they are €21.
This is due to a few reasons.
First, half of the sellside has upgraded Aixtron. JPMorgan rated them hold and had them on negative catalyst watch before recently upgrading them to buy. BofA rated them underperform, then double-upgraded them to buy, then named them SMID top pick.
Second, there was a major rally in semicap to start out the year. Today, there is a shortage in leading edge semiconductor manufacturing that is only getting worse. As sell-side banks began to create 2026 foundry capex forecasts, they realized their prior estimates were way too low. This meant semicap revenues needed massive revisions higher. Semiconductors in general are becoming a consensus long. New year, new positioning is real.
We’ve already established Aixtron as a heavily moated company with a leading market share on every one of their end markets. Crucially, their market share is higher in GaN and Optoelectronics (90%!!!), giving them a near monopoly in the two end markets facing completely unrelated yet equally compelling inflection points.
GaN is inflecting because of the inevitable 800V HVDC data center architecture transition.
Optoelectronics is inflecting because of the inevitable boom of optics in networking and the increasing epitaxial intensity faced by fabs.
Today we break down their financials. Revenue and capex build, income statement, balance sheet, and cash flow statement projections. And then value them with a DCF. Models do not predict the future but they teach us how to think about companies.
Modeling Philosophy
One thing you should probably know about me is that I invest like a VC. In thinking about the bull vs bear cases, I want my bull case to be so compelling I’d invest even if the bear case meant my position goes to 0. This means a) I don’t do bear cases and b) I set a very high bar for the bull case, even a 100% return isn’t enough. That’s why my price targets may appear to be fully unhinged (today is no exception).
Why do I use this approach?
Risk is what you DON’T see. Therefore, the “risk case” is almost never risky enough. Do you think anyone’s January 2020 “bear case” model for airlines included COVID? The unknown unknowns end investment careers. I’d rather have delusional bullishness than delusional margin of safety.
The best defense is a good offense. If there are 10 stocks in a portfolio, just 2 of them being multibaggers can eliminate so. many. losers. And focusing on picking multibaggers means that probabilistically some of them will be. The best downside protection is upside from your other names. Such is the beauty of diversification.
It’s funny because I used to be 100% in the value investor camp but now have very strong opinions most of them won’t agree with. With that out of the way, on to the Aixtron model.