We came across a bullish thesis on Photronics, Inc. (PLAB) on Value Investing Subreddit Page by Virtual_Seaweed7130. In this article, we will summarize the bulls’ thesis on PLAB. Photronics, Inc. (PLAB)’s share was trading at $17.67 as of April 17th. PLAB’s trailing P/E was 7.52 according to Yahoo Finance.
A semiconductor wafer at various stages of fabrication, showing the company’s range of expertise.
Photronics, Inc. (PLAB) is a leading supplier in the photomask industry, a vital part of semiconductor manufacturing where intricate chip patterns are transferred onto silicon wafers. Serving major clients such as TSMC, Intel, Samsung, and UMC, Photronics holds a 10–15% share of the global market. As semiconductor capex is projected to surge from ~$200B in 2025 toward ~$1T by 2030, photomask demand is expected to grow at a ~7.9% CAGR. Photronics has already seen revenue increase from $550M in 2019 to $850M in 2024, benefiting from this secular growth trend. Despite this, the market has largely overlooked the company. With a stock price of $17.67 and a market cap of ~$1.14B, Photronics trades at just ~0.92x its tangible book value of ~$19.50 per share—far below the semiconductor industry’s median P/TBV of ~3.12. Yet, this discount is not driven by poor fundamentals. The company is highly profitable, posting record operating margins of 28.5% in Q4 2024 and a FY2024 net income of $130M, translating to a sub-6x multiple on operating income—among the lowest in the industry. A conservative DCF model, assuming 5% annual growth, a 10% discount rate, and 2% terminal growth, results in a $3.45B valuation, implying over 200% upside and a fair value of $54 per share. This substantial undervaluation makes Photronics an attractive opportunity with a wide margin of safety. Furthermore, the company’s Boise, Idaho facility positions it as the only domestic U.S. photomask manufacturer, providing strategic leverage in any scenario involving deglobalization or increased government investment in U.S.-based chip production. If U.S. semiconductor sovereignty becomes a policy priority, Photronics stands to benefit disproportionately. With a durable moat, strong free cash flow, and potential for rerating, PLAB presents a unique asymmetric investment with both fundamental strength and geopolitical optionality.
Photronics, Inc. (PLAB) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 23 hedge fund portfolios held PLAB at the end of the fourth 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 doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PLAB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.