NVMI Declines 15% YTD: Should You Buy the Stock on the Dip Now?

Nova Ltd. NVMI shares have dropped 15.4%, outperforming the Zacks Computer and Technology sector’s fall of 22.4%.

Strong demand in advanced packaging and materials metrology, both of which are key drivers of Nova’s long-term growth, have enabled NVMI to outperform its direct competitors in the semiconductor metrology space, such as Onto Innovation ONTO, Applied Materials AMAT and KLA Corp KLAC.

Over the same time frame, shares of Onto Innovation, Applied Materials and KLA Corp have declined 49.3%, 37.4% and 29.3%, respectively.

What’s Hurting NVMI Stock’s Prospects?

Nova encountered a 35% year-over-year uptick in operating expenses in the fourth quarter of 2024, driven by elevated investments across research and development, sales and marketing, and general administrative functions. While this expenditure is designed to support long-term innovation and market expansion, it negatively impacted near-term profitability and may raise concerns among investors focused on operational efficiency.

Nova Ltd. Price and Consensus

 

Nova Ltd. price-consensus-chart | Nova Ltd. Quote

In 2024, China represented 39% of NVMI’s total revenues. However, the company anticipates a moderation in this contribution as demand increasingly shifts toward advanced nodes in other key regions. This expected decrease in revenues from a significant market can be viewed negatively by investors.

Nova Expands Reach With Materials Metrology Growth

In the fourth quarter of 2024, NVMI delivered record sales within its Materials Metrology portfolio, playing a pivotal role in driving the company’s overall revenue growth. Nova's Materials Metrology portfolio, including VeraFlex, Elipson and Metrion, delivered their highest-ever quarterly and annual results.

The company’s VeraFlex platform continues to be a key growth driver, with rising demand, particularly in gate-all-around transistor architectures and advanced packaging applications. The platform’s fourth-generation iteration has gained strong market traction, marked a pivotal transition, and secured a tool-of-record status with multiple leading foundry and memory customers.

NVMI’s Elipson platform has demonstrated robust performance in 2024, secured repeat orders from a leading memory manufacturer and penetrated two additional major customers. The platform's advanced Raman spectroscopy technology enables non-destructive, in-die characterization of material properties, addressing critical challenges in semiconductor manufacturing.

The Nova Metrion platform reached a milestone with its adoption by a leading global memory manufacturer, supporting advanced DRAM R&D, and high-volume production of DRAM and NAND devices. Chosen for its high-precision epitaxial layer measurements, Metrion is under evaluation by two top-tier memory and logic customers, with initial orders expected later this year. This momentum underscores the platform’s strong market potential and Nova’s expanding role in enabling advanced semiconductor processes.

NVMI Gains Momentum With Advanced Packaging Focus

Nova delivered strong momentum in its advanced packaging segment, with revenues more than doubling year over year and contributing 15% to total product revenues in the fourth quarter of 2024. This growth was driven by the strong adoption of its dimensional and chemical metrology solutions, particularly in advanced packaging applications. The sustained demand across advanced packaging and AI-driven semiconductor applications underscores a compelling long-term growth trajectory for Nova.

NVMI's acquisition of Sentronics is expected to bolster its advanced packaging offerings. The integration of Sentronics’ modular dimensional metrology technology will support Nova’s entry into the fast-growing advanced Wafer Level Packaging market. Joint development efforts are already in progress to accelerate solution delivery and align with growth objectives.

Nova’s Estimate Revision Shows Positive Trend

The Zacks Consensus Estimate for NVMI’s 2025 revenues is pegged at $840.7 million, suggesting a year-over-year increase of 25.03%.

The consensus mark for 2025 earnings is pegged at $8.30 per share, up by 2 cents over the past 30 days. This projection signals year-over-year growth of 24.07%.

NVMI’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, delivering an average earnings surprise of 9.28%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Zacks Rank

NVMI currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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