Europe’s Best Tech Stock of 2023 Has Room to Run, Goldman Says

Henry Ren, Bloomberg News

(Bloomberg) -- Last year’s top-performing European tech stock, BE Semiconductor Industries NV, has room for more gains in 2024, according to analysts at Goldman Sachs Group Inc., who predict robust demand for the company’s advanced chip-packaging equipment.

The Dutch firm’s hybrid bonding tools — a technique used to connect chips and enhance their performance — have recently moved beyond initial adoption to the capacity expansion phase. That sets the stage for the technology to be used in high-volume chip production, analysts led by Alexander Duval said in a note.

Duval recommends clients buy the stock, predicting it to rally as high as €165 over the next 12 months, a gain of 25% from current levels. That’s at odds with the average analyst forecast for a 4% decline over the period. Goldman’s price target is the highest among Wall Street analysts tracked by Bloomberg.

BE Semiconductor has been one of the biggest European beneficiaries of investors’ gold rush around artificial intelligence, soaring more than 140% in 2023. Shares rose as much as 4.3% on Wednesday, their biggest intraday advance since November.

Duval’s bullish view comes soon after several analysts turned more cautious on the stock. Deutsche Bank AG, for instance, downgraded to sell last week, on a view that investors “may be getting a little carried away” by the AI story in the chip equipment space.

Goldman said that while chipmakers are cautious about allocating capital to expensive high-end equipment during an industry downturn, the adoption of hybrid bonding could well be immune to this trend. That’s because of its “strategic importance in facilitating cost-effective growth” of the global semiconductor market, the analysts said.

BE Semiconductor’s revenue from hybrid bonding could surpass €500 million ($543 million) by 2027, from about €50 million in 2022, Duval estimated, noting the firm has already received capacity expansion orders from Taiwan Semiconductor Manufacturing Co Ltd., the world’s largest contract chipmaker.

--With assistance from Michael Msika.