CyberOptics Corporation

CYBE Details

CyberOptics Corporation (NASDAQ: CYBE) is a global leader in producing and developing high precision 3D and 2D sensors and systems through its proprietary technology, named Multi-Reflection Suppression (MRS), for inspection and metrological services. The company also produces WaferSense products, a wafer-shaped sensor, which helps in the fabrication process of semiconductors. The company’s products are also used in Surface Mount Technology (SMT) and semiconductor industries. CYBE revenues segregated as product lines, namely 1) High Precision 3D and 2D sensors 2) Inspection and Metrology systems, and 3) Semiconductor sensors (consists largely of WaferSense line of products). The company operates in several geographies, including U.S., Europe, China, Taiwan, and other Asian countries. As of June 04, 2021, its market capitalization stood at USD 240.51 million.

Received New contracts: On June 03, 2021, the company announced that it has received a new follow-on order, valued at USD 4.2 million for mini LED inspection and metrology services. CYBE had earlier received a new order on May 24, 2020, valued at USD 1.3 million from a new customer for mini LED inspection and metrology services. The company expects the revenues from both orders to be recorded in Q2FY21.

1QFY21 Results: The company reported a 7.93% rise in net revenue to USD 17.73 million in Q1FY21 (ending March 31, 2021) as compared to USD 16.42 million in Q1FY20 (ending March 31, 2020), primarily due to an increase in sales of high precision 3D and 2D sensors and semiconductor sensors. In addition, the company reported a 71.42% increase in net income to USD 1.44 million in Q1FY21 compared to USD 0.84 million in Q1FY20. As of March 31, 2021, the company stood at the cash and cash equivalents of USD 10.03 million and net cash provided from operating activities of USD 2.41 million with no outstanding debt.

Growth in Revenues and Operating profits (Source: Investor Presentation, April 2021)

Key Risks: Export revenues contributed 82% and 72% of the total revenue in Q1FY21 and Q1FY20, respectively. The global trade conflicts and trade wars could hurt the company's sales. The imposition of new tariffs could also increase cost structure and hence could negatively impact the company's profitability. Moreover, the company's top customer accounted for 22% of the total revenues in Q1FY21. Excessive dependence on a small set of customers for business could hurt the company’s financial health in the future.

Outlook: The company expects total revenues to be in the range of USD 21 million to USD 23 million for the second quarter of 2021 (ending June 31, 2021). CYBE is expecting strong long-term growth for 3D MRS sensors and WaferSense semiconductor products.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CYBE Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: CYBE's stock price has surged 25.23% in the past three months and is currently trading at a mid-band of the 52-weeks range of USD 20.81 to USD 43.48. The stock is currently trading above its 200 DMA levels. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 35.17. Considering the significant rise in the stock price in the past three months, procurement of new contracts, market dominance, and current valuation, we recommend a "Hold" rating on the stock at the closing price of USD 32.95, up by 11.92% as of June 04, 2021.

* The reference data in this report has been partly sourced from REFINITIV.