Over the past year, shares of American Superconductor Corporation (AMSC), a Massachusetts-based energy tech firm, have experienced significant growth, increasing by 276%. This rise is notable as AMSC is not a trendy new player in the AI sector but rather an established company with roots tracing back nearly four decades to an MIT professor’s kitchen. AMSC specializes in manufacturing specialty wires and electronic components essential for power companies and manufacturers, particularly in enhancing the U.S. power grid as the nation pivots towards renewable energy solutions. Despite its long history of unrewarding financial performance, with the company reporting losses consistently since inception, recent developments—particularly in new business ventures, such as its Ship Protection Systems (SPS)—have garnered attention and optimism from analysts on Wall Street.
In June, AMSC secured a major $75 million contract with the Canadian Navy, marking a significant milestone as it represents the company’s first contract with an Allied navy, following previous successes with the U.S. Navy. With this agreement, AMSC will be supplying its advanced Ship Protection Systems, critical for cloaking naval vessels and protecting them from detection and mines—a vital attribute in modern naval warfare. The initial delivery under this contract is expected in 2026, allowing AMSC to build on its foundational work in superconductor technology. Prior to this, the company had made headway with the U.S. Navy, which integrated AMSC’s protection systems, leveraging the advantages of superconductor technology over traditional copper-cable systems in terms of weight reduction and energy efficiency.
AMSC’s business strategy centers on sustainable and resilient growth, particularly in improving and maintaining electrical grid infrastructures. Approximately three-quarters of AMSC’s revenue stems from this core segment, aimed at addressing contemporary challenges such as the integration of renewable energy sources and the proliferation of electric vehicles. Additionally, AMSC’s Windtec operations, which contribute around 15% of revenue, involve providing designs and control systems to wind turbine manufacturers, predominantly in India and South Korea. Investor interest remains robust, as exemplified by major institutional investor Baillie Gifford, highlighting AMSC’s pivotal role in a transitioning energy landscape that demands increased efficiency in energy usage and storage.
Despite its recent successes, AMSC has not always enjoyed favorable conditions. The journey has been tumultuous since 2011 when the loss of its largest customer, Sinovel, a Beijing-based firm, nearly devastated the company. Sinovel ceased accepting shipments and disrupted revenue streams, accounting for a staggering three-quarters of AMSC’s earnings at the time. The fallout led to revenues plummeting from nearly $100 million to just $9 million per quarter, crippling the company’s operations. It wasn’t until 2018 that AMSC found some vindication when the Justice Department found Sinovel guilty of stealing trade secrets and ordered it to pay damages to AMSC, affirming the financial upheaval had cost the company over $1 billion in shareholder equity.
Since the dark years following the crisis, AMSC has gradually rebuilt its operations and financial standing, achieving a prideful milestone as it reported profitable non-GAAP net income for the first time in over a decade in 2022. As of August 2023, this figure rose to $3 million, indicating a steady upward trajectory. Analysts, once skeptical, have become increasingly positive about AMSC’s future, seeing potential in its diverse business segments as sustainable growth ambitions unfold. Anticipation continues to build over the potential for the company’s share price to rise above $30 from its current valuation, reflecting increasing confidence in its long-term prospects.
In a strategic move to bolster its revenue streams further, AMSC recently acquired New Jersey-based NWL for $61 million, a decision celebrated by analysts due to NWL’s access to substantial military client networks and potential to enhance profitability. This acquisition aligns with prevailing industry trends, making AMSC well-positioned to capitalize on challenges such as aging utility infrastructures. Nevertheless, the company must navigate a landscape filled with larger and wealthier competitors, including General Electric and Siemens, necessitating a focus on manageable projects where AMSC can effectively position itself as a sole bidder or niche provider.
The management at AMSC, under CEO Daniel McGahn, is committed to a steady growth strategy that prioritizes resilience across varying economic and political climates. This philosophy aims to cultivate a company capable of evolving alongside market demands and trends, such as the burgeoning sectors of renewable energy and military technology. McGahn’s leadership, from rebuilding the company post-2011 turmoil to current operational strategies, communicates a long-term vision, with AMSC aspiring to solidify its role in essential sectors of energy distribution and military applications. The trajectory of American Superconductor could affirm its resurgence as a critical player in the evolving landscape of technology and infrastructure.