Well, I don't know how many people actually read this SIMO board, but as far as I can tell SIMO is poised for sales growth through at least the end of 2026.
What is new about today relative to SIMO in the past 3-4 years is that the legacy areas (PC SSDs and cell phone controllers) are BOTH expected to put up steady 7%-12% sales growth per year for the next two years.
In PC SSDs this is due to two things. The first is market share gains at the high end premium PC market - a segment with higher prices per chip, higher gross margins as the chips are as leading edge as client controllers get, and an area that (evidently) SIMO has historically had ZERO market share. The second is market share gains in the mid-range mass market PC market. SIMO has always been in this market, but they think their share of "new" design wins is 50% compared to 30% historically. As both of those controllers go from "just released" (happening now) to becoming the standard controller used in the mainstream PC s (over the next 1-2 years) SIMO's total PC SSD controller market share is going to 40% from 30% historically.
This means about 2/3rds of SIMO's sales are going to grow ~10% per year for the next 2+ years. Frankly, this is amazing.
Also, for the long term, I think as SIMO gains big big market share, it means less competitors are going to compete down the road to grab market share from SIMO. It's more expensive to make the next generation chip, SIMO will spend the money to make it and try to get more than 50% market share, but competitors are unlikely to spend the money for a new state of the art PCIe gen6 controller in 2028 because there is an entrenched market leader, and the new competitor has no guarantee of success. The dominant marker share leader WINS in semis, and it seems that's SIMO, for, you know, as long as we have PCs. This is huge. This is the cash cow that supports expansion into new areas.
In mobile SIMO says the trend is away from NAND makers selling a mobile module which includes mobile DRAM, NAND and a controller to competitors buying those three components and building the equivalent module, and selling it to the phone companies for a lower price. This makes sense - the NAND makers want a 35% gross margin on their sales, while the competitors can survive with a much smaller profit margin. Whether this story is true or not we don't really know, but it makes sense, and the just reported results showed booming mobile controller sales, so that's the evidence for the moment that this story may be accurate.
Cell phone and PC units don't grow much each year, usually +/- 3%, with some years negative unit growth. However, if it's true that SIMO is positioned in both these segments to have market share gains in a flat market, the SIMO story just from legacy products is really really good.
Then we have the new products stories.....
Flash controllers in autos are booming according to SIMO. Auto design wins are won 1-2 years before production, in order to make the manufacturing lines run smoothly. SIMO has visibility into the next 1-2 years (if not longer) of auto controller sales, and they're going to be more than 10% of sales within 18 months it seems. And the good thing about auto sales is flash controllers in autos likely grows for AT LEAST a decade. This type of product category can get a 25x PE in semis.
Mon Titan enterprise controllers. This area is hard to visualize, and when (or if) it will ramp stronly remains (I think) unclear. But it sounds like if it does take off, it's going to be huge. SIMO is talking about talking about the role 12 8GB QLC enterprise SSDs are going to play in the AI datacenters down the road. If it happens, and SIMO's controller wins any reasonable share, it's big big money, and once you're in you're perhaps in for years. That they are taping out another Mon Titan this year, and a 4nm Mon Titan next year for (hopeful) deployment in NVidia's Rubin product in 2027 is just, well, lots of potential. I think whether this is a resounding success, or a flop, will be clear by Q4 2026. That's a long ways away, but it's nice to have a mega opportunity on the horizon. Stocks like future opportunities.
Frankly, at this point in time I don't see the potential obstacles. Usually for SIMO it's a slowdown in PCs or cell phones, and they can't grow in a slowing market. But if you're a market share gainer you can grow through slowdowns. Autos aren't going to slow down once they add flash controllers. And enterprise SSDs are THE growth market of the decade, and SIMO has zero current business, so if they can just get a foothold in the space it's a positive.
Modeling? I was thinking perhaps in 2027/28 they can get to $325m per quarter, $165m gross profit, $75m operating expenses, $90m operating profit (28% operating margin) $16m taxes at $74m net income, $2.18 per share. That's about $9.00 per year, give it a 20x PE (sales may go from $800m in 2025 to $1.3b in 2027, that's gets you a 20x PE) and you've got $180 share price.
It's reasonable. |
