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Technology Stocks : Cohu, Inc. (COHU) -- Ignore unavailable to you. Want to Upgrade?

To: w0z who wrote (1427)	9/13/1999 10:54:00 PM
From: Victor	Read Replies (1) \| Respond to of 7825

A) Fundamental 3Q/99 EPS could exceed $0.80 & Full 1999 exceed $2.20 In 2Q/99 Cohu receieved new orders for $62.3M and went into the 3Q/99 with a backlog of $56M. Cohu's 3 months Revenue usually exceeds the Quarter backlog. I live in San Diego near the factory. The fty. is working 3 shifts and on Saturdays for quite some time as oppose to 1 shift with much reduced staff last year. As such the 3Q Rev. could exceed $60M. During Up-Cycle, past record shows Rev. & EPS as follows : Quarter Rev. EPS 2Q/97 44.6M 0.70 3Q/97 52.8M 0.85 4Q/97 55.6M 0.90 1Q/98 56.7M 0.82 Ref. : yahoo.marketguide.com Further quite some cost cutting was done last year incl. obsolescent inventory write off. From above one can infer that it is very likely that the 3Q/99 EPS may exceed $0.80 and the 4Q is usually the strongest quarter so that Full 99 could exceed $2.20. The Electronics Div. has been relocated, surrendering its big office and production facility to the highly profitable Delta Design(Delta & Daymarc accounts for over 80% of the total company's Revenue) thereby vastly increasing the production capacity of Delta which would lead to accelerating increase in overall revenues and EPS in the coming several quarters for a company with stellar balance sheet and very strong financial condition of 0 Debt and tons of Cash in excess of $70M. Further market conditionwise the semiconductor equipment manufacturers such as Cohu, Applied Material, KLA Tencor, Novellus,others are at the beginning of the next 2 to 3 years of boom period of the cycle due to the following : -Semiconductor manufacturers changing to 18 micron copper and/or 300mm wafer technology which require all new state of the art process and test equipment and Delta has continued to aggressively invest in R&D and stay ahead of the competition. -The Electronics market in Far East countries such as Japan, Taiwan, China, Korea and Singapore are rapidly turniing around and increasing demand (shortages) for semi chips such as DRAMS, others thereby increasing pressures on manufacturers to increase production capacities and/or price increases. -PCs and Telecom market is hot and expected to continue for quite some time to come. -Cohu's customers include Intel, Micron Tech., Motorola, Texas Instruments, Hewlet Packard, and their like all of whose businesses are booming. The financially strong Cohu management would not go through the trouble and expense of recent aggressive expansion and relocation if they did not have a clear indication of big increase in the business for the next couple of years or more. The Cohu management's rush(traditionally conservative) to split the stock much before the next annual shareholder's meeting around next May (timing of all the previous 2 splits) is another indication of the beginning of the explosive growth. Last time (over2 years ago) the management did not split the stock when the price went to $57 because of the impending downturn in the business and the semiconductor market doldrum. (B) Technical Intermediate Price Target for Cohu could exceed $80 (Pre-Split) (1) From the point and figure chart(Measure of Demand & Supply), the current target price of Cohu works out to $80 (Pre-Split) or $40 (Post-SPlit) as follows : Ref. : equities2.barchart.com Number of X in the first column of X's after it hit the bottom of $12 = 11. This 11 times 3 (for 3 box reversal) times $2 (Unit value of the box) = $66. Add $66 to the absolute value of the bottom X in the first column of X's which is $14 giving price target of $66+$14=$80. (2) By another method, the price target again comes around $80 as follows : As per Zack's research, the year 2000 EPS will be $3.46 which sounds pretty low as per the abovementioned fundamentals. It also indicates 1999 EPS growth rate to be 45% and 2000 EPS growth to be 76% for Cohu. Taking conservative approach and cutting the lowest growth rate number by say 50%, The P/E ratio could reach 23. The target P(Price) then works to 23 times 3.46(2000 Earnings) = $80. Disclaimer : This message is just a fundamental and technical analysis and not a recommendation of any sort. Everyone should do their own due dilligence, investigation and research to evaluate all the risks and rewards before investing.