UCTT · Ultra Clean Holdings
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $62.34
Note written ·
How this view changed
- · Rating cut from Medium to Low. The note's kill line was crossed, 10 November 2026: The shares closed at $46.71 on 10 November 2026, below the $50 daily-close kill line in the previous note, 16.4% under the 28 October 2026 close of $55.88.
Price against the kill line
25.6% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $62.34, on record since 11 November 2026. The shares are down 47.3% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $62.34, which sits over the 50-day average of closes and would show the shares leading the S&P 500 again. A fourth-quarter revenue result above the $860 million top of the guide, or positive operating cash flow, would also show the shares leading.
Research onlyNot in the portfolio.
Key figures from the filings · Technology
Quarter to 25 September 2026, filed 28 October 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 759
- Revenue, change on a year (%)
- +48.8
- Gross margin (%)
- 16.9
- Operating margin (%)
- 7.1
- Free cash flow, four quarters ($M)
- −164
- Net cash, cash less debt ($M)
- −364
- Price to earnings (×)
- 83.6
- Enterprise value to sales (×)
- 1.1
All filed numbers
What Ultra Clean Holdings reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 759 | +48.8 | 16.9 | 7.1 |
| first filed | 645 | +24.3 | 16.1 | 4.6 |
| first filed | 534 | +2.9 | 15.8 | 2.1 |
| first filed | 507 | −10.0 | 15.3 | 2.2 |
| first filed | 510 | −5.6 | 16.1 | 2.1 |
| first filed | 519 | +0.5 | 15.3 | −27.3 |
| Pre-tax income ($M) | 51.1 |
| Net income ($M) four quarters: 26.6 | 39.1 |
| Diluted shares, change on a year (%) against the quarter to 26 September 2025 | +1.8 |
| Operating cash flow ($M) | −109 |
| Capital spending ($M) | 55.4 |
| Free cash flow ($M) | −164 |
| Cash and short-term investments ($M) | 271 |
| Debt ($M) long-term debt | 635 |
| Net cash, cash less debt ($M) | −364 |
| Deferred revenue ($M) | Not reported |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 272 |
| Inventory ($M) | 723 |
| Shareholders' equity ($M) | 728 |
| Market value ($M) | 2,223 |
| Enterprise value, market value plus net debt ($M) | 2,587 |
| Enterprise value to sales (×) | 1.1 |
| Enterprise value to operating income (×) | 24.5 |
| Price to earnings (×) | 83.6 |
| Price to book value (×) | 3.1 |
| Free-cash-flow yield (%) | −7.4 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 6.8% of shares outstanding sold short, 2.2 days of average trading to cover, −12.4% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $0 |
| 12 monthsfrom | $0 | $12.0M |
The thesis
Ultra Clean Holdings builds gas delivery and process modules for chip-equipment makers. The shares are more likely to lag the S&P 500 over the next three months, because a record quarter of sales has not produced cash and the company can sell new shares at a lower price than before. The fourth-quarter 2026 report, expected around 24 February 2027, shows whether operating cash flow turns positive.
The business is growing. Third-quarter 2026 revenue was a record $759.0 million, and the company guided fourth-quarter revenue to $800–860 million (Form 8-K, 27 October 2026). The shares closed at $48.10 on 12 November 2026, 66.6% below the 52-week intraday high of $144.22 on 30 June 2026 and 43.4% lower over three months.
Applied Materials, the largest chip-equipment maker, reported on 12 November 2026 after the market close. Its fiscal fourth-quarter revenue was a record $10.41 billion, up 53% from a year earlier, and adjusted earnings per share were $4.16 (Applied Materials 8-K, reported by GuruFocus). Its guide for the fiscal first quarter of 2027 is net sales of $10.6–11.6 billion, per Futu News. The $48.10 close came before that release, so it does not include the market's reaction.
Bullish and bearish views on Ultra Clean Holdings, Inc.
The bull case on Ultra Clean Holdings, Inc. (UCTT), in brief: demand read-through is strong. The bear case: profit has not become cash.
Bull case
- Demand read-through is strong. Applied Materials' fiscal fourth-quarter revenue of $10.41 billion rose 53% from a year earlier, and its first-quarter guide of $10.6–11.6 billion brackets the $10.87 billion estimate cited by Futu News (12 November 2026). Ultra Clean's modules go into this kind of equipment.
- Revenue stepped up again. Third-quarter revenue of $759.0 million rose about 18% from the second quarter and about 49% from the third quarter of 2025 (Ultra Clean release, 27 October 2026). The fourth-quarter guide of $800–860 million implies a further increase.
- Earnings beat the company's own guide. Adjusted (non-GAAP) earnings per share were $1.15 against a guide of $0.83–$1.03, and earnings under generally accepted accounting principles (GAAP) were $0.85 against $0.67–$0.87 (Form 8-K, 27 October 2026). Benzinga listed consensus at $0.94 adjusted and $728.1 million in sales.
- The shares have recovered from the post-report low. Closes rose from $37.20 on 5 November 2026 to $41.13 on 6 November 2026, $45.89 on 9 November 2026 and $49.63 on 11 November 2026, then $48.10 on 12 November 2026.
- Analysts keep Buy ratings. Needham (target $80) and TD Cowen (target $100) kept Buy ratings after cutting their targets on 28 October 2026 (Benzinga). Both targets sit well above the 12 November 2026 close.
Bear case
- Profit has not become cash. Operating cash flow was negative $42.3 million in the third quarter, after negative $41.1 million in the second (Ultra Clean release and Q3 call transcript). Nine-month operating cash flow was negative $116.7 million to 25 September 2026.
- Inventory keeps building. Inventory rose $93.4 million from the previous quarter to $723.3 million on 25 September 2026, per the Q3 call transcript. Kalkine's summary of the filing puts the nine-month inventory increase at $332.4 million.
- Equity sales continue into weakness. The call transcript reports at-the-market sales of 432,000 shares at an average of $80.13 in the period. The $400 million program, live since 14 August 2026, has room left to sell at prices near $48. Weighted diluted shares were 46.2 million in the third quarter.
- Analysts cut targets after the beat. Needham lowered its target to $80 and TD Cowen to $100 on 28 October 2026, from $125 and $140 in early August (MarketBeat, 4 August 2026).
- Debt is large and margins are thin. Long-term debt was $635.1 million against cash and equivalents of $270.9 million on 25 September 2026. Gross margin was 16.9% GAAP and 17.3% non-GAAP in the third quarter.
Price setup
The shares closed at $48.10 on 12 November 2026. That is below the 50-day average of closes ($61.98) and the 200-day average ($74.61) as of that date. The close was $84.93 on 14 August 2026, the three-month reference date.
The low close in the recent range was $37.20 on 5 November 2026, nine sessions after the 27 October 2026 report. The 52-week closing low is $21.65 on 20 November 2025, and the 52-week intraday high is $144.22 on 30 June 2026.
SEC Form 4 filings from 2 September to 3 November 2026 show no open-market insider trades. They list a 1,653-share award to director Alexander Davern on 30 October 2026 and tax withholding of 19,188 shares at $81.06 for Chief Executive Officer Jinsong Xiao on 30 September 2026.
Catalysts ahead
- ~24 February 2027 (est.): Ultra Clean fourth-quarter 2026 report. Tests the $800–860 million revenue guide and shows whether operating cash flow turns positive and inventory stops rising.
What would change the view
A daily close above $62.34, which sits over the 50-day average of closes and would show the shares leading the S&P 500 again. A fourth-quarter revenue result above the $860 million top of the guide, or positive operating cash flow, would also show the shares leading.
What it trades with
Ultra Clean sells to a small group of large chip-equipment makers, so its revenue follows their capital spending plans. Applied Materials' 12 November 2026 report is the nearest read-through. TIKR reported a 7.05% one-day fall in Ultra Clean on 28 August 2026 during a broader chip-equipment selloff, and the shares have moved with that group on weak days.
The evidence, claim by claim (8)
- Third-quarter 2026 revenue was a record $759.0 million, up about 18% from the second quarter and about 49% from the third quarter of 2025; GAAP EPS $0.85, non-GAAP EPS $1.15. Ultra Clean third-quarter 2026 results release, Form 8-K · as of
- Fourth-quarter 2026 guidance: revenue $800–860 million, GAAP EPS $1.02–$1.26, non-GAAP EPS $1.11–$1.35. Ultra Clean third-quarter 2026 results release, Form 8-K · as of
- Operating cash flow was negative $42.3 million in the third quarter; inventory rose $93.4 million from the previous quarter to $723.3 million. Q3 2026 earnings call transcript (Motley Fool via Globe and Mail) · as of
- Net cash used in operating activities was $116.7 million for the nine months ended 25 September 2026, including a $332.4 million inventory increase. Kalkine summary of the third-quarter 2026 filing · as of
- At-the-market sales in the period were 432,000 shares at an average price of $80.13. Q3 2026 earnings call transcript (Motley Fool via Globe and Mail) · as of
- Needham cut its target to $80 (Buy) and TD Cowen cut its target to $100 (Buy). Benzinga analyst actions · as of
- Applied Materials fiscal fourth-quarter revenue was a record $10.41 billion, up 53% from a year earlier; non-GAAP EPS $4.16. Applied Materials Form 8-K, reported by GuruFocus · as of
- Daily closes: $37.20 on 5 November 2026, $41.13 on 6 November 2026, $49.63 on 11 November 2026 and $48.10 on 12 November 2026; 3-month change negative 43.4%. Split-adjusted daily closes · as of
Sources
- Applied Materials Reports Record Q4 Revenue of $10.41 Billion; GAAP EPS of $3.40 Misses Estimates while Non-GAAP EPS Surpasses Expectations at $4.16 · gurufocus.com
- Applied Materials reported Q4 FY2026 revenue of $10.409 billion, up 53% year over year; adjusted EPS was $4.16, up 92% year over year. · news.futunn.com
- APPLIED MATERIALS INC /DE - Form 8-K - FY2026 · sec.gov
- Ultra Clean Reports Third Quarter 2026 Financial Results · finviz.com
- Kalkine Media
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