12:53 ET
Genesis Microchip (GNSS) 9.08 -3.16: We don't like to say we told you so, but we told you so... Back on 5/30, Briefing.com's own Robert Reid wrote on this page that "it seems to be a given that a Q1 (Jun) warning is imminent." Sure enough, GNSS issued an ugly warning last night noting that "growth has collapsed." Company now sees sales of $41 to $43 mln versus earlier guidance of $60 mln and consensus estimate of $58.5 mln... Management blamed the decline on a drop in orders (shocking) and manufacturing constraints... As is often the case with such a warning, investment firms wasted little time in slashing their ratings and earnings estimates (see Short Stories or Upgrades/Downgrades pages for details)... In fact, one firm cut its FY03 earnings forecast to $0.28 from $1.01 - an adjustment of 72%... While Briefing.com sees little reason to jump on board shares of GNSS today, especially considering that the market has routinely punished stocks that have delivered bad earnings news for two to three sessions, we do think it's important to remember that GNSS has a very strong balance sheet... If you back out the nearly $4 per share in cash (with no debt), stock now selling for about 19x revised estimated earnings... Given that investors have little confidence in estimates at the moment, one could argue that the stock still isn't cheap... However, it's getting there, and right quick... And with next generation 5G TFT-LCD capacity expected to start ramping in Q2, the demand outlook might not be as negative as it seems today... Finally, GNSS entered today's session as one of the more heavily shorted stocks in the tech sector... After today's collapse, don't be surprised if the shorts start securing their profits (buying back the stock)... In sum, the stock is likely to be dead money for the next several weeks, but based on its solid balance sheet and prospects for increased demand later this year, the company is far from dead. -- Robert Walberg, Briefing.com |
