American Superconductor (AMSC) stock is poised for a lift in the medium- to long-term due to two potentially gigantic opportunities. Specifically, the firm, whose products “regulate electric currents,” is well-positioned to benefit from growing concerns about mines in the wake of the Iran War and from the proliferation of data centers. Given these two powerful, positive catalysts and AMSC’s attractive valuation, growth investors should consider buying its shares.
AMSC’s Mine-Protection Business Is Likely to Get a Significant Lift
American Superconductor’s degaussing system hides ships’ “magnetic signatures,” preventing the vessels from setting off “magnetically activated mines.” Whereas commonly used degaussing systems “require tens of tons of copper wire” and consume a great deal of power, AMSC’s product occupies much less space and consumes much less power.
In the wake of the Iran War and the mining of the Strait of Hormuz by Iran, the U.S. and its allies have become much more aware of the danger of mines. These powers will be much more likely to take additional measures to combat them. Indeed, according to Google AI, “many (Navy) ships in the Military sealift Command … are either entirely unequipped with built-in degaussing or rely on external deperming at specific shore facilities.” Additionally, some older destroyers lack degaussing systems. In the wake of the Iran War, many, if not most, of these vessels are likely to be equipped with degaussing systems, and AMSC’s offering will likely be used on a significant number of them.
AMSC Is Well-Positioned to Benefit From the Proliferation of Data Centers
Last quarter, almost 10% of AMSC’s “nearly $100 million” in orders came directly from data centers, CEO Daniel McGahn stated on the firm’s fiscal Q4 earnings call held on May 28. During the previous quarter, only 5% of its orders were derived from data centers, so the business is growing quite quickly.
The company’s products help improve the “power quality” of data centers during construction. Moreover, data centers are beginning to realize that as they “get larger,” they have “persistent power quality” difficulties that American Superconductor “can uniquely solve,” McGahn reported. AMSC deals with these issues by “managing voltage, managing harmonics, basically providing power quality,” he explained.
Additionally, AMSC’s products help utilities deal with the strain on the grid caused by data centers, McGahn explained.
As the number of data centers continues to increase and as more utilities and data centers become aware of the company’s products to solve their problems, AMSC’s growth should accelerate significantly.
Valuation and the Bottom Line on AMSC Stock
AMSC’s forward price-to-earnings ratio for its upcoming fiscal year is 30.6 times. Meanwhile, analysts, on average, expect its top line to increase by 20.5% this year and by 16% the following year. In light of the company’s growth outlook and strong positive catalysts, the shares are very attractive to growth investors at current levels.
This article is intended to be informational only; it is not financial advice.
