CYPRESS Semiconductor (CY) Message Board

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Technology Stocks : CYPRESS Semiconductor (CY)

CY 23.82

0.0%

Apr 16 5:00 PM EST

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From: professor	5/19/2006 12:24:15 PM
	Read Replies (1) of 2694

There is a valuation discrepancy on CY's core business relative to other comps in the sector. CY owns 52 million shares of SunPower (SPWR) which is trading at $30.50. This translates into about $1.586 billion. CY is currently trading around a $2.06 billion market cap at $14.87 so you are effectively buying CY at $3.40. This is extremely cheap. If you just assume $800 mil in CY revenue (core only) the stock is trading at Enterprise Value/Revenues of less than 1. You can make the case that it should trade at least a 1.5 multiple which means the stock could DOUBLE from here. Most of the analysts are looking for more than $800 mil in revs (some as much as $1B) so one could get another bump on better fundamentals. One could go long CY and short the appropriate amount of SPWR to buy CY to take advantage of this discrepancy. If one likes alternative energy (solar cell) owning CY is also a safer way to get exposure because of the valuation discrepancy on the core business. SunPower has thee best solar cell product and there is huge demand. The company has like $700 mil revenue backlog. They're building new plants to meet the demand. Solar cell demand is not going away and even though the p/e multiple may appear high right now there is less risk here compared to other high p/e stocks. Why? SunPower has actual contracts to deliver product. The risk is limited to execution such as building the plants, getting silicon supply and manufacturing quality issues. SunPower is not just some startup with no manufacturing experience. They have the expertise of Cypress behind them who has had years of producing semiconductor products in mass quantities.

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