Here's a recent news post of interest:
TALES OF THE TAPE: Wireless Growth Powers RF Micro Shrs
By Mary Ellen Lloyd
CHARLOTTE (Dow Jones)--Recent dips in RF Micro Devices Inc.'s (RFMD) shares have shaken some momentum players out of the stock.That's giving long-term investors a chance to get in on what growth-fund manager Robert Loest calls "a premier performer in an industry that's growing at light speed." It's also giving investors like Loest, who manages IPS Advisory Inc.'s Millennium and New Frontier funds, a chance to add to positions.
Said Loest: "I have some concerns about the market early next year, but I'd still buy companies in sectors that are growing so fast they'd overwhelm short-term declines of the market." He and other asset managers say RF Micro, which makes circuitry and power amplifiers for the wireless industry, is one such growth company. Company watchers say many short sellers and momentum investors bailed out of positions in the stock Dec. 2 when Credit Suisse First Boston analyst Charles Glavin shaved a penny from what he called aggressive estimates for the fiscal third and fourth quarters.At the same time, some large, high-quality investment firms have been taking new positions or bolstering their stakes, RF Micro fans say. The company has been growing rapidly. RF Micro's revenue for the fiscal year ended in March jumped 237% from fiscal 1998, and per-share earnings jumped from break-even to 28 cents. Trailing 12-months revenue is up 184% to $228.9 million, while net income, at $38.4 million, is 23-times the prior 12 months' net income.Analysts expect the company to earn 58 cents a share in fiscal 2000, according to First Call/Thomson Financial, compared with 26 cents a year earlier.
On Friday, the Nasdaq said it would add the Greensboro, N.C., company to the Nasdaq-100 index on Dec. 20. And among nine analysts following the company, five rate RF Micro a strong buy while four call it a buy, according to First Call/Thomson Financial.
Shares Skyrocket In 1999
Trading now around 68, RF Micro shares year to date are up more than 500%. The stock, which has split twice in 1999, hit its 52-week high of 83 on Nov. 16 and its 52-week low of 10 9/16 on Dec. 14, 1998.
"The worst thing that's happened to RF is their success has attracted a lot of other fast money, and other investors may get scared because they see these ups
and downs," said Glavin, whose firm was lead underwriter on RF Micro's secondary stock offering earlier this year.An example of that, Glavin and others said, was the drop in the stock price after he cut his estimates. Glavin, citing financial-model adjustments related to the share count and the timing of orders, had stressed his Dec. 2 estimate revisions had nothing to do with the company's execution, demand or capacity. He maintained his strong buy rating on the shares and increased his 12-month price target to $85 from $75.But shares fell 10% as 13.8 million shares - eight times the daily average -traded hands. Average daily volume is 1.7 million.Glavin said RF Micro is "the best wireless pure play" in the market, and he is not alone in his enthusiasm.
Christopher Bonavico, who runs the Transamerica Premier Small Company Fund and the Transamerica Premier Aggressive Growth Fund, said RF Micro stock makes up about 5% of both funds.
"I think there's better than 80 cents of (per-share) earnings power next year and a long-term - meaning five years - outlook of rapid growth of 50% a year," he said. Using Gallium Arsenide (GaAs) HABT technology, RF Micro's products reduce power consumption among wireless applications, extending the talk time and the standby time. Customers are major wireless handset-makers, including Nokia Corp. (NOK), Motorola Corp. (MOT), Samsung Corp. (Q.SSG) and Qualcomm Inc. (QCOM).
"It's the reason Nokia is selling so well," said Bonavico, noting RF Micro generates about 40% of sales from the Finnish company."RF is the leader in a growth industry, and the fact that they have the technology ready today and capacity built and available today to serve customers is a huge advantage," he said. "That time-to-market advantage only increases, because they're consistently coming up with the next greatest thing."
Company Seen Capitalizing On Internet
Investment managers and analysts said RF Micro products will also allow it to capitalize on the Internet craze as phones, laptops, and LANs migrate to a wireless Internet.RF Micro's recently expanded agreement with TRW allows it to use that
company's technology for manufacturing cable television distribution amplifiers, cable modems, digital television converters and television tuners to serve the broadband wired market. Bonavico said one thing he likes about RF Micro is that it's using operations-generated cash to fuel capacity expansion rather than diluting per-share earnings by swelling its share count. With only 85.4 million shares outstanding and some 30 million tied up by insiders, it has a relatively small float. Competitor Analog Devices Inc. (ADI), for example, has 185 million shares outstanding and the same average daily volume as RF Micro: 1.7 million shares. The average shares outstanding in the semiconductor industry is 242 million, said Branch Cabell & Co. analyst Terry W. O'Brien. He rates RF Micro a buy.
That small float, however, can exaggerate price swings and is among the risks in RF Micro shares. Analysts and investment managers say RF Micro shares, like most technology stocks these days, are volatile.
The swings are particularly noticeable as TRW, which has owned nearly 30% of RF Micro through the technology agreement, cuts its stake to 10% in order to pay off debt. One analyst has also noted investors have had unrealistically high expectations for the company's sequential revenue growth.Shares have gotten socked the last two times the company reported earnings, despite per-share results topping Wall Street's views.
But several observers say RF Micro is positioned well for long-term growth."They're out of that early stage where you're an extremely small company and you experience very rapid growth," said SunTrust Equitable Securities analyst
Robert Tango. "They're maturing more, so (the stock is) attracting a new set of investors."
Bonavico believes that a tripling of RF Micro's valuation over the next year isn't out of the question, given the markets it is addressing and the company's cash-earnings power."There are a whole bunch of companies like Priceline.com with much larger market caps, and this company (RF Micro) has true differentiated earnings power that I'd rather invest in than in these Internet companies," he said.
-By Mary Ellen Lloyd, Dow Jones Newswires; 704-371-4033
Dow Jones Newswires 14-12-99 |
