March 17, 2008

Sigma Designs Bounce?

Notable Calls has a piece on Sigma Designs, a stock that has been featured at the Fool for a while now:

"I do like SIGM here for a bounce. Although the analyst community isn't as positive on the stock as the trader expected them to be, I feel most of the bad stuff is priced in at current levels.

Here is a quick overview of comments:

- Piper Jaffray is definitely the most cautious firm out there lowering their tgt to $25 from $39 while maintaining Neutral rating. PJ notes the midpoint of management's FY09 revenue guidance implies $80M-$95M in quarterly revenue for the last three quarters of FY09. Whil they believe in the growth of the IPTV market (8M units in `07 and 14M units in `08) as well as the Blu-ray DVD player market (1M units in `07 and 5M units in `08), they believe the company would need to achieve nearly 95% market share and stable pricing in these markets to hit its $325M (midpoint) revenue target for FY09.

Many investors may argue that a $25 price target and assumed P/E multiple are too low. However,Sigma's consumer IC peer group trades with an 11x CY09 P/E multiple. As time passes, if they feel confident in Sigma's revenue recovering from Q1 FY09, and if they see little progress made by competitors, they may re-evaluate their stance.

- RBC Capital is maintaining their Outperform rating while lowering tgt to $30 from $35. Firm notes Motorola just bought too much product last quarter and it's evident in Sigma's inventories which increased 40% sequentially from $18.9M to $26.3M.

Demand overall, in their assessment looks healthy for IPTV and if anything total unit growth should display strong positive trends for the full year. The growth however will be lumpy and Sigma will often times have to do as STB makers request, who in turn are doing what the carriers demand. Sigma has almost $9 in cash/share.

- ThinkEquity says SIGM reported Q4 in-line, but guided for a 2008 that will be back-end loaded because MOT ordered too many set-tops for AT&T in recent months. This should correct itself in about a quarter, and the year's $300-350 mln guidance was in-line with firm's previous $329 mln est. Firm has made insignificant changes to their full-year ests, resulting in a mostly unchanged valuation. U.S.-centric political risk aside-which is significant, given the risk for higher taxes, more regulation, inflation, assault on free-trade principles, "soaking" the rich, an anti-business climate, etc. Firm believes SIGM will prove to be one of their very best investment ideas for the next 12 months."

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