Why American Superconductor Stock Crashed This Week
Key Points
American Superconductor came up short of expectations despite growing revenue by 20%.
A lofty valuation may be part of the reason the stock tumbled this week.
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Shares of American Superconductor (NASDAQ: AMSC) plunged this week following a mixed earnings report for the second quarter of fiscal 2025, ended Sept. 30, on Thursday. While revenue grew by 20% year over year to $66 million, the top line came up short of the average analyst estimate. Adjusted earnings per share of $0.20 was down from the prior-year period but ahead of analyst expectations. The stock had shed about 36.6% of its value for the week as of 1:50 p.m. ET Thursday, according to data provided by S&P Global Market Intelligence.
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American Superconductor has a lofty valuation
While American Superconductor's results were generally positive, they may not have been good enough to justify the stock's premium valuation. With analysts expecting full-year revenue of $278 million, the stock traded at a price-to-sales ratio of nearly 10 prior to Thursday's decline.
Revenue in the grid segment, which includes power quality and control systems that supply the semiconductor industry as well as traditional energy companies, grew by 16% year over year to $54.3 million. The wind segment, which focuses on wind power systems, saw revenue surge by 53% to $11.5 million.
"For our second fiscal quarter, we saw strong order demand across energy and military markets, supported by tailwinds in domestic manufacturing and reliable power needs across key sectors. We are confident in our team, our execution, and very excited about the opportunities ahead in fiscal 2025," said CEO Daniel McGahn.
For the fiscal third quarter, the company expects to report revenue between $65 million and $70 million, along with adjusted earnings per share of $0.14.
Buy the dip?
American Superconductor is a pricey stock based on its current revenue and its growth rate. The company sees growth opportunities in the semiconductor industry for its power solutions, in the wind industry for its technology that integrates with large wind turbines, and for ship protection systems. The latter is a $200 million revenue opportunity serving the U.S. Navy.
For long-term investors, American Superconductor could be a compelling stock. However, the valuation is tough to get behind.
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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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