SIMO reported sales of $172m, and guided Q4 sales to be 10%-15% higher than Q3.
They increased cash by $45m in the quarter, largely from selling down $50m inventory. They've not got about $10.5 per share cash, and no debt.
The financial model isn't yet fixed. Gross margins were only 43%, and are supposed to be 43% again next quarter. Normally SIMO's gross margins are about 48%, so this deserves some explanation.
Operating cost are high relative to revenue. SIMO's sales have ranged from $251m and $123m in the previous four quarters, so it's hard to determine what is their "normalized" revenue run rate, and where should be normalized quarterly operating expenses.
It's possible to see SIMO back up to the $250m per Q revenue run rate by Q4 2024. If gross margins can get back to 50%, and then the enterprise flash controller, Ferri and market share gains in client SSD can give them some forward revenue growth, and nothing goes majorly wrong, I can see the share price pushing up toward $100 per share with perhaps $7-$8 in annual EPS. Cash should be perhaps as much as $450m by Q4 2024.
Then if the MXL settlement winds up giving them $200m (should be more), that's $650m.
Then if they finish the new office building, and do the planned sale and leaseback of the land + occupied office building that's probably another $150m-$175m.
It's not that hard to see SIMO having $800m cash and no debt by the end of 2025. I imagine they will bump the dividened, but also do a share repurchase if it's lingering anywhere below $80. |
