Economic worries are a major impediment for KEM's advances in stock price due to the perception that there will be a repeat of 1998/99 during the Asian crisis.
It's accepted that there remains great demand for capacitors right now, however, I have heard that the , so called, contracts that KEM has with their purchasers guaranty that the purchasers get a specific price but they in turn do not guaranty KEM that they will assume responsibility for any fixed amount of product.
Furthermore, the KEMET company has entered into contracts which obligate them to take back capacitors in the event they are over-purchased.
Finally, there is a rumor out there that the companies are double ordering because of this arrangement, so that the numbers that are booked are numbers that can change.
I do not know this for fact, however, I have heard about the take-back provisions of contracts that they have entered into.
I hope that these are only rumors, and that the demand for product is so great that the capacitors are actually needed in the future.
I tend to believe the company. Why would they be adding 85K square feet of floor space? And, Why would they be hiring so many new workers?
I believe the answer is that business is expected to be good for at least the next year, year and a half. I believe that we have reached resistance in the stock price at $24. |
