Big sale on ISIL today, which showed its lowest low since 8/7/03 and the lowest close since 5/27/03.
The most recent ISIL-specific news was on 3/4, when JMP Securities reiterated their Mkt Outperform rating and maintained their target @ $35. Here are their comments:
Analyst Comments: The firm recommends accumulation of ISIL on the current weakness as they believe that the stock is undervalued at 27x their CY04 EPS estimate of 90c and 20x CY05 estimate of $1.20, relative to a secular EPS growth rate of 25-30% per year.
Some general background news includes:
SIA Reports 27.4% Rise in Jan Worldwide Semi Sales
Monday , March 01, 2004 07:50 ET
According to the Semiconductor Industry Association (SIA), worldwide semiconductor sales rose 27.4% in January vs a year ago, propelled by growth in China. SIA still anticipates 2004 worldwide sales to meet their 19.4% growth forecast, citing broad-based strength in all major end-markets. They expect the communications, computer and consumer sectors to drive performance in 2004. The year should benefit as consumers migrate to new mobile technologies and businesses upgrade their information technology systems. The group also anticipates the improving economy and strengthening wireline business to contribute to growth.
SIA said global chip sales for January advanced to $15.64 billion from $12.28 billion a year earlier, led by a 34% increase in Asia-Pacific region to $6.07 billion. Chip sales in Japan rose 32%, while sales in the Americas and Europe climbed in the high teens. On a sequential basis, January sales fell 2.4%, reflecting typical seasonal demand patterns. SIA said 9 out of 12 product sectors posted lower sales in January, while standard cells, analog and programmable logic devices recorded flat-to-modestly rising growth.
Smith Barney's March Semi Purchasing Manager Survey
Monday , March 08, 2004 06:32 ET
According to results from their Semiconductor Purchasing Manager Survey for March, Smith Barney reported that semiconductor industry fundamentals remain robust. The firm believes the survey supports the argument that chip suppliers should be generating strong order growth, which is typically positive for chip stocks. Expectations for Q1 sales growth have ticked up slightly since last month, and expectations for Q2 sales growth ticked up more meaningfully. Order growth expectations for Q1 and Q2 also ticked up in a similar fashion. Smith Barney thinks the results of their survey are most positive for NSM and TXN given product specific leadtime and pricing data.
The firm remarked that inventory restocking activities appear to be getting more traction among purchasers with 36% of respondents noting they are building inventory compared to 28% last month and 19% in January. Overall, pricing and lead time trends remained favorable from a chip supplier's perspective. However, the pace of leadtime increases waned, and a few areas such as discretes and analog had noticable lead time or price deceleration.
Smith Barney noted the continuation of inventory stockpiling means that semiconductor manufacturers will now be seeing a couple of quarters of strong book-to-bill ratios in the 1.1 - 1.3x range, and a likely acceleration of order patterns from current levels. They noted that semiconductor stocks tend to typically trade inline with semiconductor order patterns, which could bode well for investors over the next three or four months at least. So while semiconductor stocks have not acted well over the past seven weeks or so, they believe that industry conditions are ripe for semiconductor stocks to work again before 2H04.
IDC Forecasts 18% Growth in Microchips for PCs
Monday , March 08, 2004 07:28 ET
IDC's latest sales forecast says microchips for personal computers will grow 18% in 2004, but near stagnant spending on desktop computers will lead to single-digit annual growth rates through 2008. The technology research firm commented that sales of such chips are expected to grow an average of 7.8% annually over the next five years, with growth tapering off to 2.2% in 2008. The firm believes that most of that growth will stem from notebook computers. Through 2008, notebook PC chip sales will jump an average of 16.1% a year, while desktop PC chip sales will grow only 2.9% a year on average.
First Albany Ups Several Chip Stocks
Monday , March 08, 2004 07:45 ET
First Albany upgraded several semiconductor component and capital equipment stocks and suggested that investors increase their exposure to the group ahead of March quarter earnings reports. The firm noted that the SOX index has corrected 10%, yet the group's fundamentals appear to have gained strength throughout Q1. They upgraded ATML, AMAT, EXAR, KLAC, PLAB and SMTC from Neutral to Buy. First Albany said that device and equipment lead times are stretching, and they think that it will take several quarters to relieve chip supply constraints and that the device makers are starting to have pricing power for the first time in almost four years.
Of course, the other story is that the SOX Index closed at the lowest level since last December. Much of the weakness seems to have been led by Intel around concerns about PC growth rates.
It is interesting that ISIL has yet another conference presentation scheduled for Wednesday 3/10, at the JMP Securities Growth Conference. During their most recent conference presentations, ISIL indicated that their backlog was increasing and they expected to gain market share and outperform the growth of their markets. That is consistent with their business plan, which calls for above industry-average growth combined with above average margins.
At current levels, ISIL is trading at about 27.8X the 2004E $0.86 and 22.2X the 2005E $1.08. Beyond that the company has an extremely strong balance sheet. It is debt-free, and its cash and ST investment position of about $1 billion represents about 30% of its market cap.
Disclosure: I couldn't resist the disjunction between ISIL's continuing strong operations and the weakness of its stock price, so I added to my position. If it goes lower, I plan to add more. |
