Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Trader J's Inner Circle -- Ignore unavailable to you. Want to Upgrade?

To: Trader J who wrote (3084)	1/4/1999 7:52:00 AM
From: j.o.	Read Replies (2) \| Respond to of 56535

(S) NMGC j.o - Specialist for NMGC – Neomagic Corp. – First Report Current price: 22 1/8 P/E (on expected Jan 99 earnings) 18.5 Next annual earnings report: Feb. 15th Expected earnings growth through 2000 (analysts) 31.3% Computer Graphics Industry P/E is over 70 (?) Market Cap: $544 mil Shares outstanding: 24.6 mil. Neomagic Corp. is a provider of multimedia accelerator chips for notebook computers. Their solutions, named “MagicWare”, combine multimedia accelerators with embedded DRAM memory in order to provide high-speed multimedia with very low power consumption. Neomagic works with many of the better notebook manufacturers, integrating its chips with DELL, Gateway, Sony, Toshiba, HP, and others. In June of this year, they launched the industry's first 256-bit chip in this market, offering an high-performance alternative to the well-tested 128 bit MagicWare Line. At present, most revenues are still derived from their 4 different 128-bit chips. The company went public in 1997, and has since traded in a range from $13-23, although there was a dip to $10 ½ in October of this year. The company seems very susceptible to market sentiment, and trades very quickly when moving. Opening gaps are common. The stock is now flirting with its all-time highs. Given the fundamentals of the industry and valuations for others in this business, NMGC seems to be an attractive buy. It has a very low P/E in comparison to the industry, and seems to have good R&D, which should maintain the strength of its technological advantage. There are good fundamental reasons to expect a breakout above the $23-24 level, after which the stock could reach $28-30 quite quickly, and then move higher as a momentum play. One word of caution: this stock is very close to creating a triple-top (since issuance mid-1997) around the $23-23.5 level. If we fail to break higher in the short term, this stock is very susceptible to trading back to its support around the $18-19 level. Momentum is currently flagging, though this is probably end-of-year related. My main questions about the company are: 1) How much longer will the 128-bit line continue to generate revenue? 2) Will the 256-bit chip achieve the same market penetration as the 128? The financials look very healthy. This company offers a leveraged play on the chip industry, as the company is “Fabless” – that is, they outsource their chip production to others (I believe Mitsubishi). This obviously lets them get on with what they do well, namely design and sell multimedia solutions. Their debt is tiny, they have very good cash stocks for their burn rate, and appear to still be accelerating their sales. The key points will be the development of sales of the new line, which enhances DVD and other intensive graphics applications, which is mainly pitched (at the moment) at the high-end business user. As prices for notebooks continue to decline, it would appear that these features might become affordable for the individual. A similar effect has boosted their 128 bit line over the last year. I will try to get in contact with the company in an effort to see how they expect to do in relation to their expected yearly (1/99) earnings report, scheduled for Feb. 15. Expectations are $1.20 per share. Last quarter they exceeded 29 cent expectations by 4 cents. That was in November, when the stock traded up to around $18. Overall, I really like this one - will be watching price action over first couple of days of 1999. Also watching short interest...might be very high at the moment, giving possibility of a squeeze. More next time! PS - This is my first try at checking out co. top to bottom, so bear with me. Tips are welcome! j.o. (S) NMGC

To: Trader J who wrote (3084)	1/5/1999 2:48:00 AM
From: Coriolis	Respond to of 56535

All: S(HRC) My firstgo at this and obviously I'm new at it. Healthsouth Corp. is the nation's largest provider of outpatient surgical and inpatient rehabilitation services. They took a nosedive in late August when they took some hits on some managed care contracts, falling from near 30 to 7 1/2 dollars per share. They have made a steady recovery since, and especially in December, when MACD has been positive and stochastics have recently have been flirting with and recently crossed over the oversold line. They made the news twice today. JP Morgan just picked them the best of the sector for 1999. They also purchased 8 nursing homes from Meditrust. Overall looks like a reasonable long term pick for buying on any dips that might present themselves. Will keep an outlook for any rumours, etc, and will call IR tomorrow and report anything of substance. today's price 16 52 wk high 30.8 low 7.6 PE ratio 14 mkt cap 6.4 million Analysts: 5 buy and 7 strong buy recommendations Will try to get more info on my other issue, IIVI for everyone tomorrow or the next day. This is a learning experience for me, and if anyone has anything illuminating to add please feel free. --Coriolis