Last week we ruminated over stocks that somehow had managed to buck the prevailing market tides, most notably a handful of techs. Add to their number a little outfit called Genesis Microchip. Its shares, which sold at a hair over 7 back at the end of March, by June 28 had catapulted to above 38. And despite the rough weather the past couple of sessions, they still wound up on Friday a tiny fraction below 34.
As the surge in the stock plainly suggests, Genesis has attracted the attention of Wall Street's best and brightest, or anyway its most venturesome. No mystery, either, what has captured their fancy: a sexy product line -- digital imaging chips for flat-panel displays and projectors, rising revenues and favorable earnings projections.
And we have no reason to quarrel with the Street's generally favorable prognosis. We suspect, however, the enthusiasm's overdone. Here's why:
The stock has a P/E of some 75 times estimated earnings for the fiscal year ending next March.
The company has just been sued for patent infringement by a rival chipmaker, and the U.S. International Trade Commission has agreed to investigate a related complaint. (Genesis Microchip, we're sure it will come as no great surprise to you, says the charges are "baseless.")
By no means least, insider selling in Genesis Microchip has been positively awesome.
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