Hello Elroy, welcome to the board.
Don't you have valuation concerns about INVN?
Yes, I certainly do. That’s why I made the comment about climbing a wall of worry.
I compare them to SIMO, a fabless semi stock that is in a nice spot in a growth sector (NAND flash controllers).
I know that you have been a strong supporter of SIMO from reading your many posts on the Qualcomm and SIMO boards. I have looked at SIMO from time to time based on your past comments. Since I am a software guy, I don’t pretend to know the ins and outs of hardware development. I have several friends who are hardware developers (EEs) and they laugh at some of the questions I ask. I believe brokenSt0nes has a hardware background and so I always appreciate his contributions to this (his) board.
As a long-time applications developer I think I can smell the marketing BS in GPS and MEMS. I could not say the same for NAND flash controllers.
Why do you prefer INVN - a company with slightly lower sales than SIMO, a good bit lower gross margins than SIMO and double the market cap of SIMO?
When I first started delving into InvenSense, I only saw a hardware company producing a commodity product – about which I know enough to be dangerous. Over the last several years, I have been reading about how MEMS sensors would change the user interfaces of cellphone apps and also augment GPS location. To do this, you need applications and I looked around for companies that provided the necessary software. I posted on this board some information about the companies Movea and Trusted Positioning. When InvenSense bought BOTH of these companies, I realized that they were betting the farm on the value added by the outdoor and indoor positioning.
Given the current situation, I think I can evaluate how well InvenSense may leverage these technologies into all cellphones and the new class of consumer electronics called “wearables.” This latter category is the reason that I’m so long term bullish.
The current P/E is sky high at 347, and normally, I wouldn’t touch any company at that level. However, I think I understand how it got there: they are recognizing revenue further out and have built up inventory and have increased R&D. As you’ve read from other posts, Apple is the big unknown, and I think it’s only a matter of time when they fully integrate InvenSense products. We may find out in a few days or it may take two quarters to fully understand the true level of engagement. I think this is important because Apple will lead the world in applications for the iPhone and the iWatch and many others will follow along, hopefully using InvenSense products to provide a similar level of performance.
What is expected in Q3 sequentially out of INVN?
This is a critical question, but I don’t have a clear answer. I am going to guess that it will not be 15-20% sequential growth. It could be wildly varying growth over the next two years depending on level of adoption for positioning applications and the MEMS microphone products. |
