September 24, 2008

On Tessera Technologies

The Fool mentions Tessera Technologies, a MF Hidden Gems Paydirt recommendation in this article. What does this company do? They shrink technology. They also hold several patents on how to shrink technology. In fact, licensing and royalty revenue nearly composed all of the $56 million the company earned in the second quarter of this year.

Zack's likes them also, giving the company a price target of $35. That seems like a pretty steep price with the forward P/E at just under 15, but if the company anticipates record revenue to come in via licensing and royalty, a price target in the low $30's may not be outrageous.

One thing to keep in mind is that one of the company's patent expires in 2010. If Tessera has not developed additional patents through research and development by then, their plans for growth will most certainly be slowed.

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