Photronics, Inc. (PLAB): A Bull Case Theory

We came across a bullish thesis on Photronics, Inc. (PLAB) on Enterprising Investor’s Substack by Tyler Moody. In this article, we will summarize the bulls’ thesis on PLAB. Photronics, Inc. (PLAB)'s share was trading at $18.11 as of 6^th June. PLAB’s trailing P/E was 9.38 according to Yahoo Finance.

Photronics (PLAB) appears to be an overlooked semiconductor name trading at a compelling valuation, particularly on a free cash flow basis. The company, which manufactures photolithography masks essential to integrated circuit and flat panel display production, is down nearly 50% from early 2024 highs and 24% year-to-date, now trading at a $1.14B market cap. With 11 manufacturing sites globally and 85% of sales coming from outside the U.S.—notably 33% from Taiwan and 25% from China—PLAB is a global player with geographic risk exposure.

Much of the recent investor pessimism stems from its China exposure amid trade tensions, and from the nature of mask demand itself, which depends on new chip designs rather than chip volume. Slower product rollouts have thus dampened near-term growth, and weak demand in auto and industrial end markets hasn’t helped.

However, the emerging wave of AI-enabled chips could fuel a surge in new designs, providing a tailwind for PLAB over the next year. Photronics has been strategically shifting toward higher-end masks with better margins, and despite recent cyclical weakness, it remains fundamentally solid. It has $558M in cash and no debt, which supports resilience through industry downturns.

Over the last three years, PLAB averaged $154M in free cash flow, putting its FCF multiple at just 7.4x—an attractive level for value-focused investors. While it doesn’t pay a dividend, it has actively repurchased shares, buying back $77M worth over the past year. Though uncertainties remain, the setup suggests a classic cyclical value opportunity with upside potential as demand normalizes.

Previously, we covered a bullish thesis on Monro (MNRO) by the same author, highlighting its depressed valuation, high yield, and potential for recovery despite ongoing consumer weakness. With an 8.75% dividend yield, low debt, and cheap FCF and book multiples, Monro‘s stock since then has appreciated by approximately 28%.  Photronics (PLAB) presents a similarly contrarian setup: a debt-free, cash-rich semiconductor supplier trading at 7.4x FCF, positioned to benefit from a rebound in AI-driven chip design. Both offer value upside, but with different risk-reward profiles.

Photronics, Inc. (PLAB) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held PLAB at the end of the first quarter which was 23 in the previous quarter. While we acknowledge the risk and potential of PLAB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.