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Investing.com -- Jefferies in a note dated Tuesday has upgraded Aixtron SE (ETR:AIXGn) to “buy” from “hold” ratting and increased its price target to €27 from €18.20, citing strengthening demand from hyperscalers and optical communications equipment makers that should benefit the German semiconductor equipment manufacturer’s optoelectronics business through 2026 and 2027.
The brokerage said increasing hyperscaler spending patterns into 2026 and recent commentary about accelerated capital expenditure from datacom and optical players strengthens Aixtron’s optoelectronics revenue outlook.
The upgrade comes as Jefferies sees an attractive setup for a re-rating of the shares, combining near-term optical strength with medium-term growth from gallium nitride adoption in artificial intelligence data centers and a de-risked silicon carbide outlook.
Aixtron closed at €20.32 on the prior trading day. The company provides deposition equipment to the compound semiconductor industry, primarily planetary MOCVD systems for applications including power electronics and optical data communications.
Jefferies noted that both Coherent and Lumentum, which it estimates are Aixtron’s two largest optoelectronics customers for epitaxy tools, reported December quarter capital expenditure around 35% above expectations.
Both companies discussed front-loading capex in the first half of 2026, with Coherent stating capex will "increase sequentially over the remainder of the fiscal year" and Lumentum indicating visibility to a significant block of additional capacity starting in the second half of 2026.
The brokerage expects these trends to be reflected in optoelectronics revenue strength for Aixtron in 2026 and 2027, which may surprise to the upside in the first half of 2026 above seasonal trends. Jefferies forecasts are 8% above 2026 consensus revenue expectations.
For the medium term, Jefferies highlighted NVIDIA’s Kyber rack architecture, due to launch in the second half of 2027, which is expected to adopt 800V high-voltage direct current distribution.
With healthy utilization rates across the gallium nitride supply chain, the bank expects power semiconductor manufacturers to place epitaxy tool orders in the second half of 2026 or first half of 2027 to build out capacity in anticipation of demand. Aixtron holds approximately 90% market share in gallium nitride MOCVD tools.
Regarding silicon carbide, management guided a 20 percentage point decline in the revenue mix, implying revenues down approximately 70% to around €40 million.
Jefferies views these comments as cautious, noting this implies only around three silicon carbide tool shipments per quarter and that China 8-inch silicon carbide orders could surprise to the upside in any given quarter.
Aixtron trades at 19.5 times one-year forward EV/EBITDA on trough earnings, slightly above its average of 18 times but still below its peak of 31 times, according to Jefferies. The bank’s new €27 price target is based on fiscal 2027 EV/EBITDA of 19.0 times on EBITDA of €177 million.
Jefferies raised its revenue forecasts for 2026 to €568.5 million and for 2027 to €670 million, representing 8% and 5% above consensus expectations respectively.