Slower Core Market Uptake and Competition Pressure Lead to JP Morgan Neutral View on Aixtron

J.P. Morgan has initiated coverage on Aixtron SE, the European technology company specializing in semiconductor deposition equipment, with a "neutral" rating and a price target of €13.40 for December 2026. This cautious stance by the investment bank is primarily driven by the expectation of a slower recovery in Aixtron's core markets following a period of extraordinary growth, compounded by increasing competition and prevailing market overcapacity. Shares of Aixtron, which supplies the necessary tools for producing compound semiconductors like Silicon Carbide (SiC) and Gallium Nitride (GaN) power electronics, saw a decline upon the announcement reflecting the market's reaction to the tempered outlook.

Aixtron experienced a robust expansion phase between 2020 and 2024, capitalizing on surging global demand fueled by the electrification of transport and the general growth of the power management sector. In anticipation of sustained momentum, the company significantly expanded its operating and capital base. However, the market has since softened, with customers now absorbing the prior overcapacity built up during the boom years. This normalization is a central factor in J.P. Morgan's near term caution, despite the brokerage maintaining a more supportive long term view on the company's prospects.

The J.P. Morgan report provides detailed financial projections that are notably more conservative than the broader market consensus. Analysts forecast a revenue decline of approximately 15% in the fiscal year 2025 to €538 million. This is expected to be followed by only a modest recovery to €565 million in 2026, and a stronger rebound to €669 million by 2027. Critically, the investment bank's EBIT (Earnings Before Interest and Taxes) forecasts for 2025 and 2026 are projected to be 11% to 13% below the Bloomberg consensus. J.P. Morgan expects EBIT to fall to €91 million in 2025 before recovering to €107 million in 2026 and €145 million in 2027. This reduced profitability is attributed to lower operating leverage and less favorable product mix effects on margins, which were exceptionally high at over 43% in 2023.

The bank identified several key headwinds limiting Aixtron's performance over the next two years. These include reduced capital spending from major semiconductor manufacturers after their recent expansion cycle, increasing pricing pressure on SiC wafers and integrated circuits, and intensified competition from both Western and Chinese equipment makers entering the compound semiconductor space. Furthermore, the report highlights that the expansion of Aixtron's cost base, including a larger headcount and increased depreciation from new facilities, will temper its earnings leverage, thus limiting the near term upside potential. Owing to these near term risks, particularly those related to a weaker second half of 2025 and the forthcoming 2026 guidance, J.P. Morgan has placed Aixtron shares on a Negative Catalyst Watch. Despite these financial pressures, the brokerage acknowledged the company's solid financial position and expects improved free cash flow as inventory levels unwind by 2026 to 2027, potentially allowing the company to consider share buybacks once its cash reserve exceeds €250 million.