AXTI: New Export Permits Will Intensify Regulatory And Execution Downside Risks

Analysts have raised their price target on AXT by approximately $2.90 per share to around $7.00, citing improved revenue expectations after the company received new export permits that enable it to resume shipping indium phosphide substrates to additional customers.

Analyst Commentary

Analysts are updating their models ahead of upcoming quarterly results, reflecting the impact of newly granted export permits on AXT's near term revenue and margin profile.

Bullish Takeaways

• Bullish analysts see the higher price target as justified by improved visibility on Q3 revenue, with incremental shipments of indium phosphide substrates expected to support top line acceleration.
• Resumption of shipments to additional customers is viewed as a sign that regulatory risk around key export permits is easing, which could warrant a higher valuation multiple.
• The revised forecasts imply better capacity utilization, which bullish analysts believe can enhance gross margin progression and strengthen AXT's path toward more consistent profitability.
• Improved demand signals from strategic customers in high performance communication and optical applications are seen as an early indicator of longer term growth potential.

Bearish Takeaways

• Bearish analysts caution that the higher price target still embeds execution risk, as AXT must demonstrate that increased permits translate into sustainable order momentum rather than a short term bump.
• Regulatory exposure tied to export approvals remains a structural overhang, and some see the risk of future permit delays or policy shifts limiting the multiple expansion implied by the new target.
• There is concern that renewed shipments could pressure pricing in competitive substrate markets, potentially capping margin improvement despite higher revenue assumptions.
• Bearish analysts also highlight that visibility beyond the next couple of quarters remains limited, making the stock vulnerable if Q3 results or guidance fail to meet the newly raised expectations.

What's in the News

• AXT issued fourth quarter 2025 guidance, targeting revenue between $27 million and $30 million, indicating expectations of continued business momentum (Company guidance).
• The company projected a GAAP net loss of $0.03 to $0.05 for the same period, suggesting that profitability remains a near term challenge despite revenue growth goals (Company guidance).

Valuation Changes

• Discount Rate decreased slightly from approximately 11.01 percent to about 10.88 percent, indicating a modest reduction in the risk profile used in the valuation model.
• Revenue Growth remained essentially unchanged at roughly 26.18 percent, suggesting no material shift in long term top line expectations despite the updated permits.
• Net Profit Margin was effectively flat at about 10.85 percent, reflecting stable assumptions for AXT's long term profitability.
• Future P/E edged down marginally from around 30.35 times to about 30.25 times, implying a slightly lower valuation multiple applied to forward earnings.
• Fair Value was unchanged at 9.5, indicating that the combined effect of small metric adjustments did not alter the model derived intrinsic value estimate.