Thanks. That ML report by Edelstone was most thorough and useful. It was a real contribution to post it.
My views on Rmbs were only bolstered by the report. Actually, I think posting those targets, and that reasoning, and then awarding only an outperform, instead of a strong buy, was a rather poor call.
The $60 one year target is a 50% return. I'd say that is likely to outperform the market.
More importantly, the one year target is based on discounting 2002 back at 25%. Given that Intel has apparently all but guaranteed Rmbs's lock on at least the next five years of higher performance (and then probably virtually all) PC memory, I'd say that is a pretty rich rate. Of course, it normally wouldn't be rich at all for an early stage tech company, it would be too puny. But this is a special situation. Look at it this way. At current prices, Rmbs should return at least a 40% IRR return over the next 4 years to the price target of $150. I'd say that will smoke most portfolios over the period, what you think? And I suspect the risk is really pretty low. Though of course it doesn't look like it. Which is what makes the opportunity. (Otherwise it would be selling for $90 today for a 14% IRR.)
Also, imagine what happens if Rmbs gets its royalty on HDTV ram. Which seems like a real possibility. HDTV needs humongous ram, from what I've heard.
Doug |
