NSIL featured in Briefing.com's Trader's Edge
Trader's Edge - NETsilicon Inc (NSIL)
09-Feb-00 08:34 ET
[BRIEFING.COM - Damon Southward] If it's chip, it's hip... One need look no further than the Philadelphia Semiconductor Index (SOX), which has rallied 130% over the past year and is up 48% over just the last four months. Leading the charge have been the designers of chips for networking and telecommunications systems such as Applied Micro Circuits (AMCC) and Triquint Semiconductor (TQNT), which have rolled 975% and 1350%, respectively over the past year. The rising tide has already lifted the entire fleet of stocks in this sector. But as a result of increasing interest in the field of information and household appliance networking, NETsilicon Inc (NSIL) could soon find its shares swept up in the next theme rally.
Trading Points
The company develops and markets semiconductor devices and software solutions designed to meet the networking requirements of embedded systems. NSIL's products are incorporated into the design of embedded systems to provide them with the ability to communicate over standards-based LANs and the Internet.
In recent months, the stock has found a following among investors mining for gold in the Internet appliance sector. NSIL has been picked up as one of the handful of companies with a chance to become a player in this emerging space. Echelon Corp (ELON 46 13/16), a designer of interoperable control networks for "smart devices," is currently the most prominent name on the list. Although Echelon has a history of missing its number, investors have come pouring into the stock. Over the past three months, ELON has rallied more than 400%, as industry heavyweights such as Microsoft and General Electric have come together to construct the "smart home appliance."
NETsilicon was spun-off from optical networking products manufacturer Osicom Technologies (FIBR 84), itself a beneficiary of theme-based momentum buying, up more than 800% over the past four months. Osicom Technologies purchased NSIL in 1996 for just $5 mln. Today, NSIL sports a market-cap of almost $500 mln.
An investment in a company such as NSIL is a wager on a concept and a gamble that the market will continue to value style over substance. In its short time as a publicly traded company, NETsilicon, unlike Echelon, has delivered on its promises. For instance, in the Q3 ended Oct. 31, NSIL posted net income of $0.07 per share, 5 cents better than the First Call mean, vs year-ago loss of $0.17... Sales more than tripled to $10.1 mln.
The surge in net sales was due primarily to an increase in OEM customers... The company is scheduled to report earnings February 24. Wall Street is looking for a quarterly profit of $0.03 a share.
Only three firms cover the stock. Two of them -- CIBC World Markets and U.S. Bancorp Piper Jaffray-- participated in the company's initial public offering. They both rate the shares a "buy," while the other has a "strong buy" rating on the issue. CIBC served as lead underwriter of the $7 per share offering.
Briefing.com highlighted NSIL in the Story Stocks (Archives) session ahead of the IPO. In that piece, Briefing.com noted that we would consider being buyers of the stock on a double-bottom formation. The bottom we were looking for occurred in late November at the $12 level. Since then NSIL has marched 200%.
For the fiscal year ending 2000, NSIL projected to turn a profit of $0.10. Earnings for the 2001 period are predicted to grow 180% to $0.28 a share.
Risks to owning this stock are numerous. Primary of them is the tendency for small-cap companies with high foreign exposure to disappoint investors with earnings surprises, often caused by adverse currency effects. For the 3-months ended Oct. 31, international sales accounted for 64% of NSIL's top-line, compared to 58% in the yr-ago period... Is also notable that company relies on just a few customers for the majority of its revenues.
On a trading screen, NETsilicon should be grouped with the likes of Echelon Corp (ELON), Panja Inc (PNJA) and Wind River Systems (WIND).
Key Stats:
Price/Sales Ratio: 17.4
Price/Earnings Ratio: 2000= 365; 2001= 130
Market-Cap: $495 million
Shares Outstanding: 13.5 million
Float: 5.3 million
52-Week Range: 9.00 to 27.75
Average Daily Volume: 318,000
I would like to thank NAZ for posting this on Raging Bull.
Jack |
