ACM Research Inc

ACM Research, Inc. (NASDAQ: ACMR) designs, produces, and markets equipment for semiconductor manufacturing, along with offering related service solutions. Its products support processes such as single-wafer and batch wet cleaning, electroplating, stress-free polishing, plasma-enhanced chemical vapor deposition (PECVD), as well as track and thermal operations. The company’s wet wafer cleaning equipment primarily includes two models built on its proprietary Space Alternated Phase Shift (SAPS) technology—namely, the Ultra C SAPS II and Ultra C SAPS V.

As per our previous Kalkine’s Global Tariff Report published on ‘ACMR’ on 12^th May 2025, Kalkine provided an ‘Buy’ stance on the stock at USD 24.41 based on fundamental analysis and the stock price has now moved up by ~ 19.91% since then and has breached Resistance 2.

Noted below are the details of support and resistance levels provided in our previous report:

Rationale – Sell at USD 29.27

• Decline in Gross Margin Indicates Cost Pressures: Despite achieving strong revenue growth, ACM Research experienced a noticeable decline in gross margins. For Q1 2025, gross margin fell to 47.9% from 52.0% in the same quarter of 2024. On a non-GAAP basis, gross margin also slipped from 52.5% to 48.2%. This contraction suggests rising production or input costs, unfavorable changes in product mix, or pricing pressures. Though the margins still fall within ACM’s long-term target range, the year-over-year reduction signals headwinds that may affect profitability if not mitigated.
• Drop in Non-GAAP Operating Income and Margin: ACM reported a 10.6% year-over-year decline in non-GAAP operating income for Q1 2025, which dropped from USD 39.8 million to USD 35.6 million. The corresponding operating margin also fell from 26.2% to 20.7%. This erosion in margin indicates a growing challenge in controlling costs or maintaining efficiency amid rising expenses. While GAAP operating income showed slight improvement, the deeper insights from non-GAAP metrics — which exclude stock-based compensation — reflect the core operational struggles that could impact long-term profitability if not addressed.
• Shipment Volatility and Customer Pull-In Effects: Total shipments in Q1 2025 declined sharply to USD 157 million from USD 245 million a year ago, marking a significant drop that may raise concerns about order stability. This reduction was attributed to customer pull-ins during Q4 2024, which inflated prior-period results but left the current quarter with reduced volumes. Although the company emphasized a combined 8.9% year-over-year growth across Q4 2024 and Q1 2025, the uneven distribution underscores a potential issue with demand visibility and cyclical order patterns — an area of concern for investors looking for consistent growth.
• Decline in Non-GAAP Net Income and EPS: ACM’s non-GAAP net income fell from USD 34.6 million in Q1 2024 to USD 31.3 million in Q1 2025, a decline of nearly 9.5%. Similarly, non-GAAP diluted earnings per share dropped from USD 0.52 to USD 0.46. This downward trend, despite rising revenue, reflects margin pressure and possibly higher costs from new tool development, R&D investment, and global expansion efforts. Such a decline in core earnings metrics may indicate that the company’s ongoing investments and scaling efforts are yet to translate fully into bottom-line returns, posing short-term profitability risks.

Valuation (Using P/E Multiple)

Share Price Chart

Conclusion

Despite solid top-line growth, ACM Research faced several operational headwinds in Q1 2025. Gross and operating margins declined year-over-year, reflecting rising costs and less favorable product mix. Non-GAAP earnings also fell, highlighting pressure on core profitability. Additionally, a sharp drop in quarterly shipments due to prior customer pull-ins raises concerns about order consistency and demand visibility. These factors suggest underlying challenges that could weigh on near-term financial performance.

Based on the notional gains, valuation downside and price action stance, a "Sell" recommendation on ACM Research, Inc. (NASDAQ: ACMR) has been given at the current market price of USD 29.27 as on 10 July 2025 at 07:30 AM PDT.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 10 July 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.