American Superconductor stock surges on Q4 earnings beat: Is it time to buy?

American Superconductor Corporation (NASDAQ:AMSC) reported impressive fourth-quarter results after market closing yesterday following which the stock opened strong today and at one point in time was trading up over 30%. The company posted a non-GAAP EPS of $0.05, beating estimates by $0.07. Additionally, its revenue soared to $42.02 million, surpassing expectations by $4.89 million.

Revenue profitability and business performance

AMSC’s revenue increased by 32% year-over-year for Q4, driven by higher sales in both its Grid and Wind segments. For the full fiscal year 2023, revenue grew by over 37% to $145.6 million, reflecting the company’s strong market position and demand for its products.

The company’s net loss for Q4 narrowed significantly to $1.6 million from $6.9 million a year earlier. On a non-GAAP basis, AMSC achieved a net income of $1.9 million, marking a substantial improvement from the previous year’s loss. This positive trend indicates better cost management and operational efficiency.

AMSC generated $2.1 million in operating cash flow for the year, bolstering its balance sheet. As of March 31, 2024, the company held $92.3 million in cash and equivalents, positioning it well for future investments and growth opportunities.

CEO Daniel P. McGahn highlighted the company’s diverse order bookings and a strong backlog of $140 million. AMSC is optimistic about its growth prospects in fiscal year 2024, driven by expanding markets and new opportunities in renewable energy and grid modernization.

Valuation and analyst concerns

Despite recent stock gains, analysts have mixed views on AMSC’s valuation. The stock has seen a significant increase, yet some believe the current price may have already factored in much of the upside potential. A cautious approach might be warranted, with some analysts advising to wait for a better entry point.

American Superconductor’s Q4 earnings beat has led to a notable surge in its stock price. With strong financial performance and positive market outlook, AMSC appears to be on a solid growth trajectory. However, considering valuation concerns, it’s essential to analyze the technical charts to determine if now is the optimal time to buy. Let’s delve into the charts to gain further insights.

The Fibonacci challenge: Conquering key levels

Despite today’s gains, American Superconductor’s stock remains much lower than its January 2021 highs above $30. After peaking, the stock entered a downtrend, crashing below $4 by the end of 2022. It started an uptrend in May last year, which has accelerated since November 2023.

AMSC chart by TradingView

During today’s move, the stock faced resistance at the 61.8% Fibonacci retracement level from the previous swing high and swing low, near $20.9. For the uptrend to continue, the stock needs to cross this level and sustain above it. Bullish investors should monitor the price action closely and consider initiating a long position once the stock closes above $20.9.

Traders looking to short the stock should exercise caution as the current momentum is bullish. However, a short position can be considered at current levels with a tight stop loss at $21. If the bullish momentum fades, the stock might retreat to $14.15, where profits can be booked.

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