Entegris shares are down since the semiconductor equipment supplier announced its acquisition of CMC Materials last month. On Wednesday, one Wall Street analyst said he thinks the Entegris stock sell-off is "overdone."
Deutsche Bank analyst Sidney Ho upgraded Entegris stock to buy from hold. Also, he has a price target of 160 on ENTG stock.
On the stock market today, Entegris stock dipped a fraction to close at 127.42.
Entegris stock hit an all-time high of 158 on Nov. 22. But shares tumbled after Entegris announced a deal to buy CMC Materials on Dec. 15. Through Tuesday, the stock was down 11% since the announcement vs. a 3% gain among its semiconductor-equipment peers, Ho said in a note to clients.
Investors Balk At Deal Valuation
"Investors appear to be concerned with the increased leverage from the proposed acquisition in a rising rate environment," Ho said. Also, investors didn't like the premium Entegris is paying for the slower-growing CMC business, he said.
Entegris is buying CMC in a cash-and-stock deal with an enterprise value of about $6.5 billion. The total per-share consideration represented a 35% premium over CMC's closing price on Dec. 14.
Ho described the sell-off in Entegris stock as "overdone."
"We continue to believe the deal could be accretive to (earnings per share) by about 15% in the first year following closing, and we see potential for additional accretion from revenue synergies," Ho said.
Entegris Stock A 'Long-Term Leader'
Aurora, Ill.-based CMC is a leading supplier of advanced materials primarily for the semiconductor industry. Those materials include chemical slurries and pads for polishing semiconductor wafers. Cabot Microelectronics changed its name to CMC Materials in October 2020.
Meanwhile, Billerica, Mass.-based Entegris makes high-purity materials and processes for the semiconductor industry and other tech fields, including life sciences.
Entegris stock ranks 10th out of 32 stocks in IBD's semiconductor-equipment industry group. Also, it has an IBD Composite Rating of 97 out of 99, according to IBD Stock Checkup.
Entegris stock is in the IBD Long-Term Leaders Portfolio.
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