Founder, BWS Financial Inc

Hamed Khorsand

Founder

Independent Stock Specific Research

BWS Financial Inc

BWS provides independent stock specific research focused on companies with distinct value that are going through a special situation where there is a tangible catalyst not priced in. The catalyst can be anything from new product, restructuring, M&A, management change, change in business strategy, etc. BWS’s focus is to understand the change and evaluate the potential return for investors.

BWS utilizes a self formed proprietary approach in discovering stocks by putting great emphasis on deep research. BWS does generate short recommendations following a similar criteria.

Equity Bottom-Up

<ul>
<li>AXTI slightly beat its downward adjusted third quarter guidance but issued fourth quarter forecast showing further deterioration in the business</li>
<li>During the third quarter AXTI experienced a significant delay in orders from customers causing revenue to decline by approximately 11 percent sequentially</li>
<li>The spill over of weakness into the fourth quarter should not be a surprise given the pace of decline in revenue in the third quarter</li>
</ul>


AXTI slightly beat its downward adjusted third quarter guidance but issued fourth quarter forecast showing further deterioration in the business
During the third quarter AXTI experienced a significant delay in orders from customers causing revenue to decline by approximately 11 percent sequentially
The spill over of weakness into the fourth quarter should not be a surprise given the pace of decline in revenue in the third quarter


<ul>
<li>Third quarter results could serve as an inflection point for AXT Inc. (AXTI) after the Company reported a rebound in gross margin in the second quarter</li>
<li>When AXTI reported second quarter results, management described a design win that would be part of a consumer electronic device with a feature in a higher end model</li>
<li>We believe the reference could have been to the iPhone 14 Pro and Pro Max having different a different display feature compared to the iPhone 14.</li>
</ul>


Third quarter results could serve as an inflection point for AXT Inc. (AXTI) after the Company reported a rebound in gross margin in the second quarter
When AXTI reported second quarter results, management described a design win that would be part of a consumer electronic device with a feature in a higher end model
We believe the reference could have been to the iPhone 14 Pro and Pro Max having different a different display feature compared to the iPhone 14.


<ul>
<li>AXTI is operating at optimal profitability levels with enhanced material recovery and improved product mix driving higher earnings results</li>
<li>AXTI reported net income above our expectations on gross margin inching towards 40 percent, a level AXTI has not seen in four years</li>
<li>The broad customer base is giving AXTI the ability to grow revenue with the higher gross margin. This is not something the Company has experienced before</li>
</ul>


AXTI is operating at optimal profitability levels with enhanced material recovery and improved product mix driving higher earnings results
AXTI reported net income above our expectations on gross margin inching towards 40 percent, a level AXTI has not seen in four years
The broad customer base is giving AXTI the ability to grow revenue with the higher gross margin. This is not something the Company has experienced before


<ul>
<li>The manufacturing exposure AXTI has in China has become an overhanging shadow on the shares even though the Company has managed to grow revenue sequentially for more than a year</li>
<li>AXTI’s manufacturing facilities are in proximity to Beijing, which is now under COVID-19 watch for lockdowns. So far, AXTI has not experienced any curtailment in manufacturing.</li>
<li>COVID-19 spreading in China has raised fears AXTI could suffer from forced shutdowns. There have been no reports of AXTI stopping manufacturing. </li>
</ul>


The manufacturing exposure AXTI has in China has become an overhanging shadow on the shares even though the Company has managed to grow revenue sequentially for more than a year
AXTI’s manufacturing facilities are in proximity to Beijing, which is now under COVID-19 watch for lockdowns. So far, AXTI has not experienced any curtailment in manufacturing.
COVID-19 spreading in China has raised fears AXTI could suffer from forced shutdowns. There have been no reports of AXTI stopping manufacturing. 


<ul>
<li>AXTI continues to experience an increase in demand for substrates with indium phosphide (InP) and gallium arsenide (GaAs) growing in the first quarter</li>
<li>AXTI has shifted away from the seasonality it would find itself since making the move to multiple new facilities two years ago. Customers have continued to increase their spending </li>
<li>AXTI reported first quarter revenue of $39.7 million compared to $37.7 million reported in the fourth quarter. We had been forecasting revenue of $39.6 million</li>
</ul>


AXTI continues to experience an increase in demand for substrates with indium phosphide (InP) and gallium arsenide (GaAs) growing in the first quarter
AXTI has shifted away from the seasonality it would find itself since making the move to multiple new facilities two years ago. Customers have continued to increase their spending 
AXTI reported first quarter revenue of $39.7 million compared to $37.7 million reported in the fourth quarter. We had been forecasting revenue of $39.6 million


United States

AXT, Inc. uses a proprietary crystal growth technique to produce semiconductor substrates for a variety of electronic and optoelectronic applications.  The Company's products are used in wireless and fiber optic telecommunications, lasers, LEDs, satellite solar cells, and consumer electronics.

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