>>it wasn't about poor earnings it was for not having a bright outlook into next qtr. I don't know if anything has changed.
Yes, this is right. I don't know if anything has changed either but they did say they had 90% of the quarter done. If investors outlook is dim, expectations are low, which I view as positive for the stock price. They have a diversified customer list and with margins expanding, earnings are going to grow nicely even without a steep revenue ramp and the probability of a disaster is quite low. So downside is limited, IMO. Now, if they do get a bunch of orders, book:bill goes back above 1.10 and investors start believing revenues will ramp (in early '98), then you are talking about 100+% EPS growth for a few quarters (if you use a consistent tax rate). That growth will be the best in the Gallium Arsenide group and you can buy it now for a discounted P/E. I do think it deserves a discounted valuation relative to Vitesse and Anadigics but RFMD is a good comparable as RFMD has its own issues. There is also the chance that investors decide to value TQNT on par with VTSS and ANAD for a while as well, which is when I would sell.
Net net, TQNT starts the quarter with pretty good visibility and the outlook for 1998 is very good. Even if this quarter ain't great, TQNT should match expectations. The conference call will likely be the real catalyst as that book:bill number will be everything. I would much rather own TQNT than VTSS, ANAD or RFMD at current prices. Investors were re-taught the lessons of component stocks the other day when ALTR blew up because of inventory management at Cisco. Component stocks do not deserve big premium multiples. VTSS's valuation is a joke, IMO. Unless there is a HUGE acceleration coming in VTSS's business, that stock is overvalued... |
