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

To: bobbyl who wrote (6627)

1/23/2019 8:34:29 PM

From: robert b furman

1 Recommendation

Recommended By
Runomo™

Read Replies (1) | Respond to of 7827

Hi Bobbyl,

This morning Stiffel Nicholas downgraded Cohu from buy to hold.

They also reduced the price target from 30 to 20.

This is a recap of the analysts that follow Cohu:

DateResearch FirmActionCurrentPT

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My TDA account indicates they will release earnings on February 24th.

Cohu's website does not yet indicate the earnings date.

I suggest all stockholders to read the Investors presentation on their website:

cohu.gcs-web.com

Keep in mind this is a huge merger. - relative to past small acquisitions.

I have no doubt it will take time for it all to be absorbed.

The key here is Cohu has acquired Xcerra, which was a bigger company in revenue and cash holdings. Xcerra also had higher margins.

Cohu was the better equipment maker , but Xcerra was better at achieving simpler niches, that had less R&D and higher margins.

The combination has little overlap and is presented as being 32% accretive immediately.

Now don't get hyped up , there will be severance charges and transition charges for the next 3-5 years.

There will also be much more business and much higher margins it will take time to work through.

There is no doubt in my mind that we'll be back to new highs within 12-24 months.

When sell side brokers reduce their ratings, it is often to create a selling spree - which allows cheaper accumulation prices for them to scoop up.

They'll be glad to upgrade the stock after they've achieved their desired level of stock accumulation.

This merger gives Cohu global scale to become consistently profitable.

Old models (Xcerra's older technology) will be discontinued and Cohu's Radco divisions products will be the replacement upgrades.

In 2008 Cohu bought Rasco from Dover - it's market share was # 2. Once Cohu bought Rasco, they made their gravity feed testhandlers faster and better.

About 3 years later Xcerra bought Microtest also from Dover (it was # 1 in market share) Five years after Cohu bought Rasco, it surpassed Xcerra's Microtest in market share.

So what Cohu has now done is bought the larger and older installed owner base of gravity feed test handlers.

The servicing of these older handlers is a very lucrative business.

The selling of pieces that wear out is calle consumables. It is a business that offers margins in the mid 60's.

Additionally when a chip shrinks in size (the result of a node size change - miniaturization process) it then requires that the testhandlers have new tracks upon which the chip slides around while being handled - these are called dedicated die kits - this also offer excellent margins and is almost always done by the maker of the handler.

With Cohu and Xcerra joining they now service the largest global installed owner base of test handler - by far!

In this months investor presentation Cohu estimates that 46% of their total revenue will be Contactors and dedicated die kits plus, the servicing of that now much larger installed owner base.

The 54 % of revenue will be new equipment. They do say mobility is off and slow. They also confirm automotive and industrial is not off and doing well.

5G which is in it's early implementation is slowly ramping. Samsung has some of the first 5g smartphone models out mid year.

Today in texas I saw my first 5G tower cell mounted on a light pole here in Houston. So the roll out is in its beginning phase and will not be huge until 2020 - but growing now!
Q4 and Q1 are the seasonally weaker quarters historically.

If price gets weak in here, view it as a gift. Buy another 10%.

Jeffrey Jones will work the expense write offs such that earnings after adjustments will be down - so too will taxes.

What won't be off is free cash flow. That's what we need to see this year and next. Lower taxes and more free cash flow, so that the 350 million in debt will be repaid quickly.

Cohu has never had debt before. For them to go into debt to consolidate their global leadership, had to be a slam dunk good move in their eyes.

They have a hugely better future with this merger.

It will take time - but it will be worth the wait.

Buy as much as you can on price weakness - I think Cohu will be a triple in 24 months - maybe quicker.

Along the way - they'll pay us to wait. Not in a big way.

We should not want them to.

They have an opportunity to put their earnings into big growth - not many companies have that opportunity.

Growth stock always have the better multiples - Cohu just became a growth stock that will double it revenue in the next 24 months.

Hold with confidence and get you some more on price weakness!!

In short sell side brokers wanting to depress the stock price - to buy more on the cheap - join them!!

I've sold a bunch of 15.00 puts in February, May and August.

Hope that helps bobbyl.

Bob