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Strategies & Market Trends : The Options Box -- Ignore unavailable to you. Want to Upgrade?

To: Poet who wrote (8006)	12/3/2000 3:32:02 PM
From: dli	Respond to of 10876

Poet, another example of a "value technology stock" is CMOS. Trading at a PE in the neighborhood of 4 while growing at a 175% clip this year the stock is almost priced for bankruptcy liquidation. This was also evident in the market reaction to their earnings realease last Wednesday where they exceeded estimates but lowered revenue guidance. The stock opened down about 12% at $16 and then rallied about 40% to an intraday peak of $23 on Friday. I do not expect the stock to move much over the next few months, but downside risk is rather small and once the semi equip cycle turns back up it will probably take off like a rocket. In the meantime its a great candidate for covered writing, ratio writing, butterfly, or horizontal spread strategies considering that option premiums are pretty juicy. Here's what Briefing.com had to say about the earnings: Credence Systems (CMOS) 18 1/2: This chip equipment company concluded FY00 with a record quarter. Net sales were up 175% to $220.2 mln, pro-forma net income of $52.5 mln, or $0.96 per diluted share, was a penny ahead of estimates and well ahead of the $0.21 per share profit in the yr-ago period, and its operating margin of 34.7% was the highest in the company's history. That was the good news (was being the operative word as it is past tense). The bad news is that CMOS tarnished the glowing report with an admission that revenue will likely be down sequentially as the uncertain industry environment raises concerns that some of its orders could be pushed out. This is exactly what the market didn't want to hear as it has been burdened for some time now with concerns about a slowdown in the chip industry. CMOS knows that all too well as its stock is down 77% from its May 2 high despite reporting some robust results in the interim. In August, CMOS reported Q3 results that were $0.14 ahead of estimates, and yet, its stock has fallen 53% since that time. The solid operating results in Q4 will garner some accolades, but as is the case with all other companies right now, it is the guidance from CMOS that really matters to the market. Should revenues decline in Q1, it will be the first sequential decline in nine quarters. Sensing that the guidance from CMOS is indeed a sign that the best of times are behind the company, traders are marking its shares down nearly 2 points in pre-market action. That loss brings CMOS within striking distance of its 52-wk low of 14 3/4. As it stands now, CMOS may look remarkably cheap considering it is expected to earn $3.51 per share in FY01 and has approximately $4 per share in cash and short-term investments. EPS estimates are bound to come down, though, which makes it difficult to peg a valuation on CMOS given that recent revisions for other chip-related companies, such as Micron (MU 33 1/2) and Kulicke & Soffa (KLIC 9 7/8), have been pretty dramatic. It is our sense that most of the bad news has been factored into CMOS already, but until investor perception and the company's earnings visibility improves, we wouldn't expect much improvement in its stock.-- Patrick J. O'Hare, Briefing.com