Plexus Corp. just delivered its Q2 2024 earnings call, and while the market focused on its restructuring efforts and revenue challenges in healthcare and industrial segments, something else caught my attention: a silent, steady share grab in the semiconductor capital equipment (SemiCap) market. This under-the-radar maneuver could position Plexus for substantial growth as the SemiCap market recovers, potentially outpacing even its ambitious 9%-12% CAGR target.

On the surface, Plexus' Q2 story seems to be one of cautious optimism amidst challenging market conditions. The company acknowledged headwinds in both Healthcare/Life Sciences and Industrial sectors, primarily due to ongoing inventory corrections. These issues, combined with a late Q1 revenue dip, resulted in operational inefficiencies, prompting a restructuring effort expected to generate $20 million in annualized cost savings.

However, beneath this narrative of restructuring and cautious outlook lies a compelling growth story in the SemiCap subsector. While Plexus acknowledged the overall softness in the SemiCap market, they highlighted a key differentiator: their revenue gains within SemiCap are primarily driven by market share gains, not just a modest market improvement.

This is a critical distinction often overlooked. Plexus isn't just riding the wave of an anticipated SemiCap recovery; they are actively capturing a larger slice of the pie. Their Q2 earnings call explicitly states that their SemiCap revenue gains are "aided by market share gains over the past two years and continued new program ramps."

""..aided by market share gains over the past two years and continued new program ramps." - https://seekingalpha.com/symbol/PLXS"

What's fueling this silent surge? Plexus attributes its success to a simple yet powerful factor: execution. Their consistent track record of delivering high-quality products on time, their ability to ship finished systems, and their strong engineering capabilities are resonating with SemiCap customers. As the industry went through a downturn, Plexus appears to have doubled down on its core strengths, differentiating itself from competitors struggling to maintain their footing.

This strategic maneuver could pay off handsomely as the SemiCap market rebounds, potentially propelling Plexus to exceed its revenue growth goals. Let's crunch some numbers to understand the potential upside.

Assume the SemiCap market grows at a conservative 5% in fiscal 2025. If Plexus maintains its current market share, their SemiCap revenue should grow at a similar rate. However, given their track record of recent share gains and the expanding funnel of opportunities, it's reasonable to hypothesize a more aggressive growth scenario. Let's say they capture an additional 2% market share in 2025, bringing their total SemiCap revenue growth to 7%.

If SemiCap contributes approximately 20% to Plexus' overall revenue, this 7% growth in SemiCap alone could contribute 1.4% to the company's overall revenue growth. This incremental growth, fueled by share gains, could propel Plexus' total revenue growth beyond its 9%-12% CAGR target.

Hypothetical SemiCap Revenue Growth for Plexus

The following chart illustrates a potential scenario for Plexus' SemiCap revenue growth, assuming market growth and additional market share gains.

While uncertainties in the global economy and specific end-market dynamics remain, Plexus' silent share grab in the SemiCap market presents a compelling argument for its long-term growth potential. This strategic move, coupled with their focus on operational efficiency and profitability, could deliver impressive returns for investors willing to look beyond the near-term turbulence and recognize the power of a well-executed silent play.

"Fun Fact: Plexus takes its name from the intricate network of blood vessels or nerves that form a connected system. This reflects the company's philosophy of forming close, interconnected relationships with its customers, collaborating to deliver complex and demanding solutions."