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

To: Trader J who wrote (7477)	2/3/1999 1:43:00 PM
From: j.o.	Respond to of 56535

(S) NMGC story from briefing.com: 14:15 ET ****** NEOMAGIC (NMGC) 12 13/16 -9/16. Another report from the Nationsbank Montgomery tech conference: what would you pay for a company with 80% year/year revenue growth, a better than 50% market share, a six quarter streak of handily beating earnings estimates, year/year earnings growth of nearly 50%? How about 11 times trailing four quarters' earnings? That's all you have to pay for NeoMagic, the leading manufacturer of multimedia accelerator chips for laptops. Despite executing perfectly on its business plan over the past two years, NMGC shares have been dead money. This disconnect between the company's earnings performance and its stock price performance is explained by the fact that the future holds serious challenges. As the company itself indicated today, the potential for continued gains in its traditional laptop business is limited. NMGC is now looking for future growth to come in the DVD and digital camera area, where its track record is unproven. With future top and bottom-line growth appearing far less promising, both analysts and company officials themselves appear to be losing enthusiasm. Both Morgan Stanley and Nationsbank Montgomery downgraded the stock on January 27, with NB Montgomery citing the likelihood of a slowdown in revenue growth going forward. And a look at the insider sales list on this stock is worrisome. This is not our favorite indicator, but the sales of this stock when it was in the 20s late last year can't be ignored. Even conference attendees were cool on NMGC -- our woman on the scene reported sparse attendence for this once-hot company. Despite long term concerns, there is some short-term hope for the stock -- NMGC will report earnings after the close on February 18, and the company indicated today that it was comfortable with analysts' estimates. For more Briefing.com reports from the NB Montgomery conference, see today's Stock Brief. ----------- NMGC keeps falling through historical support levels. Have to assume at this rate that we will test the 11 area that held when tested in November during the market pullback. WOW - in terms of earnings, this stock looks incredibly cheap for a chip stock, but can they maintain earnings growth, which has been great so far? Even 1/2 the growth rate so far would mean that this stock holds value, in my view. I am going to try to pick some up below 12 over the next couple of days...but start small! This one's a falling knife at the moment, and it will probably churn around here and maybe trade up(?) into the earnings announcement Feb 18?? j.o. PS - anyone else have a view on this stock??