Sure, but we just say that because the current stock price is $88.
They're probably going to earn $9.00 in 2022 with sales growing more than 30%. And that's after sales grew 71% in 2021 and grew 17% in 2020. Their revenue growth WAY outpaces the flash controller industry, which means (I think) that they are gaining significant share, and have basically now become the entrenched dominant go to company in flash controllers. Flash controllers are not super advanced tech, but they are a NECESSARY component in anything that uses flash, which is lots of devices.
Given those trends (if that description is accurate) they should get a valuation premium, not the big discount that they currently receive.
$140 is $130 after you subtract cash from the share price. So.......why should they sell for about 15x? That's not the appropriate valuation for a semi company dominating a necessary market segment and delivering reasonable growth, and very high cash generation. $140 seems like a great price compared to the current share price, but it doesn't seem so super duper compared to premium semiconductor stocks.
But lets see - I also think it might be necessary for the buyer to make management an offer they can't refuse, which means......high. Otherwise management may decline for the reasons I've given, So to pre-empt management resistance I think they buyer may need to bid something above $150, and perhaps closer to $200. If SIMO reports well on May 4th, I think the share price would head toward $100 on it's own, so that may be the better starting point for considering what's reasonable as an acquisition price.
It also depends on who is the buyer. Hopefully we get more than one of them coming after SIMO. I'd be interested to hear from the potential buying companies (MCHP, MRVL, AVGO, INTC) why they would NOT want to own SIMO. I think if SIMO is in play one of them will end up with SIMO, who wouldn't want to own them? They've been outperforming EVERY semiconductor stock on the planet in terms of revenue, earnings and cash flow growth over the past 2-3 years, what else can they want? |
