Here's the flip flop from Collins Stewart all over again.
- First, note the dates. 2/12/2008 and 2/15/2008
- Second, note that RMTR outperformed VINH's estimates for Q4 2007, even before taking the tax benefit
- Third, note that the 2008 guidance was exactly what VINH expected in the earnings preview
- Fourth, in the earnings preview, VINH modeled not having to pay tax in 2008. If RMTR didn't take the tax benefit in Q4 2007, guidance would have met or exceeded his 2008 expectations. In other words, taking a tax benefit and paying tax in 2008 is equivalent from an accounting perspective as not taking the tax benefit in Q4 2007 and taking it quarterly in 2008. So Vinh shouldn't be changing his mind about being undervalued 2 days before earnings and then downgrading the stock based on "valuation" 1 day after earnings
- Fifth, he doesn't take into account (or give credit to RMTR) for the likely scenario that RMTR will take another tax benefit in Q4 2008
- Sixth, he doesn't mention cash flow anywhere here, the one metric that best reflects Ramtron's improving performance and financial condition. And based on guidance, we know that cash flow will be strong in 2008
- Seventh, note that Vinh is careful not to torpedo RMTR's strong fundamentals, limiting the psychological damage of the stock, enabling the stock to recover to higher ground once Collins Stewart's clients have had time to accumulate
Please don't tell me that Vinh and Collins Stewart are not playing games here for the benefit of their clients. Like I said before, these games are pure and simple unethical manipulation. Don't get suckered into selling your shares.
That being said, we popped off the 200-day MA around $3.60. I expect more weakness in the next few sessions so that we have a full test of the 200-day MA. But I would be very surprised to see these heavy discounts on RMTR last given the strong growth expected in 2008 that will likely exceed guidance.
Tom
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FEBRUARY 12, 2008
Q4’07 Earnings Preview
RMTR to report Q4’07 financial results
Ramtron will report its Q4’07 financial results on Thursday, February 14,2008 after the close of market and will host a conference call at 5 PM ET, which can be accessed by dialing 800-399-7503 with conference ID 32581758. A replay can be accessed by dialing 706-645-9291 with conference ID 32581758.
Our estimates for Q4’07 are for revenues of $14.0M (4.9% q/q) and PF EPS of 5c. For Q1’08, our estimates are for revenues of $13.7M (-2.4% q/q) and PF EPS of 4c.
Expect inline quarter
We are expecting the company to report solid quarterly results inline with our estimates and driven by broad-based strength across industrial (ISM), computing, and metering. In metering, we believe revenues have been driven by China and India. We expect computing revenues from sales to Ramtron’s printer cartridge customers and expect that continued ramp of new customers and share gains could provide significant growth
opportunity for the company in 2008.
Expect solid outlook
While the company no longer provides a quarterly outlook, we expect RMTR to provide CY’08 guidance inline with our PF EPS estimate of $63M/25c. In 2008, we expect broad-based growth across all of Ramtron’s end market segments with the core catalysts being computing and metering. While we expect growth in the company’s automotive segment to be fuelled by continued share gains at Hyundai (HYMLF.PK, $57.64, NR) automotive, we anticipate upside growth in this segment may be tempered by slowing sales in the automotive market.
- Reiterate BUY and $5 PT
- Risks and Valuation
Our $5 PT is based on 20x our CY’08 PF EPS estimate of $0.25. Risk factors that may impact the company and the stock include competitive pressures from other non-volatile technologies, including alternate ferroelectric memories such as FeRAM, company execution risks, and Ramtron’s ability to offset the decline of its Enel (ENEL.MI, €7.41, NR)revenues with other revenues.
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FEBRUARY 15, 2007
Downgrading to HOLD on Valuation
RMTR reports strong Q4’07 results
Ramtron reported total revenues of $14.3M (+6.5% q/q) on product revenues of $13.7(+5.4% q/q), which were above our estimate of $14.0M and $13.7M respectively. PF EPS was 6c, which is higher than our estimate of 5c. Additionally, GM improved to 54.5% (+30 bp q/q). By end markets, Metering represented 28% of sales at ~$4.0M (-12% q/q), Computing came in at 24% of sales at $3.4M (+7% q/q), Automotive was at 15% of sales at $2.1M (+33% q/q), and Industrial represented 25% of
sales at $3.6M (+7% q/q).
Automotive stronger than anticipated
Automotive revenues were surprisingly strong in the quarter given the recent weakness in the economy. Auto revenues benefited from several design wins that have started to ramp in the quarter, as well as increasing content opportunities and share gains at customers such as Hyundai automotive. Additionally, many of the design wins the company has secured with high-end European luxury automakers, such as Mercedes and BMW, have started to become available in mainstream cars.
Computing remains a significant opportunity in 2008
We believe that printer cartridges, which is part of the computing segment, presents a sizeable opportunity for RMTR in 2008. The company guided computing to 34% of total revenues in 2008, which would represent ~$22M (+65% y/y). We expect that growth will be driven by share gains at existing customers, as well as the ramp of new customers. Custom part tapeouts over the past few quarters will allow RMTR to gain additional
share at its top 2 customers. Additionally, we expect Ramtron to continue to ramp 3 additional customers through the course of the year.
RMTR projected strong 2008 guidance
RMTR guided CY’08 revenue growth of +24-28% y/y, and GMs of 53-55%. Additionally, the company indicated net income, excluding stock based compensation and income tax expense, of 10-12% of total revenue. As a result of the deferred tax asset of $7.6M that was recognized in the quarter, we are modelling a 38.5% tax rate moving forward. The company still has $65M in NOLs remaining, which will prevent the company from paying cash taxes in the foreseeable future.
Adjusting estimates
For Q1’08, we are raising our revenue estimate slightly to $13.8M from $13.7M previously. We are lowering our EPS est to 2c from 4c previously, reflecting a 38.5% tax rate. For 2008, our new estimates are $64.5M/16c, from $62.9M/25c; again reflecting the impact of a new tax rate. Finally, we are introducing 2009 estimates of $79.0M/21c.
Downgrading on valuation to HOLD
With the stock expected to open up this morning close to our $5 PT, we are downgrading the stock to a HOLD rating on valuation. We believe the company continues to be well poised to grow meaningfully in 2008 and is deserving of a premium valuation relative to its peers. However, given that
shares are currently trading at ~24x our CY’09 EPS estimate of 21c, we believe the stock is fairly valued at current levels. |
