Camtek: Tough Comps Weigh on 2026 Growth, Upside Limited Given Elevated Valuation

Core Conclusion

Camtek experienced exceptional revenue growth in 2024 and 2025, driven by a 84% y/y surge in China business and HBM-related demand. However, 2026 faces a combination of difficult comparables, a decelerating China contribution, and rising operating expenses from the Visual Layer acquisition that will compress margin expansion. The stock has risen 60% year-to-date to $207.46, already discounting an acceleration into 2027 that remains highly uncertain. With a target price of $163 (32x CY27 EPS of $4.82), the current price offers limited upside and no near-term catalyst. Maintain Equal-weight.

What the Market Is Overpricing

The market is pricing in sustained high growth driven by HBM and OSAT capex cycles, but Camtek’s revenue mix limits its exposure relative to peers. China, which contributed 49% of 2025 revenue, will see growth fall from 84% to low single digits in 2026, removing the largest engine of past outperformance. HBM orders exceeding $260 million over 2026-2027 are early-stage and insufficient to re-accelerate aggregate growth given Camtek's smaller OSAT/memory weighting versus competitors like NOVA or KLA. The stock’s YTD gain of 60% implies expectations for 2027 growth that analysts view as the most uncertain variable.

Evidence Chain

2026 revenue growth will be materially below both historical rates and consensus estimates. Management’s 2H26 guidance implies 25% sequential growth, equating to ~14.4% full-year revenue growth versus the analyst estimate of 16.3%. The 2025 China revenue base—up 84% y/y—creates a challenging comparison; China is expected to post only modest growth in 2026, dragging total company growth.

HBM order wins, while notable, are insufficient to shift the growth trajectory. Camtek announced cumulative orders and forecasts exceeding $260 million from two HBM manufacturers for 2026-2027, described by management as initial orders with potential upside. However, the company’s OSAT and memory customer mix is smaller as a percentage of revenue than at packaging peers, muting the impact on overall growth rates.

The Visual Layer acquisition will create negative operating leverage in 2026. Operating expense growth is forecast at 18.3% y/y, outpacing revenue growth of 16.3%. While gross margin is expected to reach 53% by year-end 2026, the elevated expense base leaves operating margin only slightly up y/y. Initial expectations for meaningful operating leverage in 2027 have been reduced.

EPS estimates for 2026 and 2027 have been revised downward. CY26 EPS was cut from $3.70 to $3.50, and CY27 from $4.89 to $4.82, primarily reflecting higher opex from the Visual Layer integration. Revenue forecasts for both years were raised modestly but were more than offset by the cost headwind.

Key Risks and Disagreements

• OSAT capex growth could decelerate faster than modeled if end-market demand (smartphones, PCs) weakens further.
• HBM capacity expansion may slow, or the transition to HBM4E and hybrid bonding could shift orders away from Camtek’s current inspection solutions.
• Market share loss to ONTO or KLA in metrology/inspection could materialize, particularly as China-focused local competitors gain traction.
• China semiconductor localization investment could fall short of management’s expectations, reducing the 2026 revenue contribution.
• Visual Layer acquisition integration challenges could perpetuate elevated opex and delay synergy realization.

Valuation and Trading Implications

At $207.46, Camtek trades at a 27% premium to the target price of $163, which is based on 32x CY27 EPS of $4.82—a multiple reflecting GM expansion to 53% but already above historical averages. The stock’s YTD performance has embedded optimistic assumptions for 2027 acceleration, yet 2027 growth remains the largest swing factor and is not yet verifiable. Without a clearer catalyst and with downside risk to near-term estimates, the risk/reward is unattractive at current levels. Recommend waiting for either a pullback to a more reasonable entry point or visible signs of re-acceleration in the China packaging buildout before initiating or adding to positions.

Appendix: EPS Forecast Changes Summary