CEO selling $2M. That should be a headline, not a comment on this board. If he's so un-confident of this stock why should any small investors be buying?
Yes, indeed. Insiders have been bailing out while a clueless obscure analyst upgraded the stock today !
At these levels, the stock is expensive, regardless of their debt rescheduling plans.
You are right but be careful. You call was right at 16-17. Now the stock is going to 13-14 which is more acceptable. The best price would be around 10 to buy. It is hard to loose at that level as the Blackstone owners would do anything in the medium term 1-2 years to influence some stock analysts to upgrade it.
When comparing Texas Instruments to Freescale, the following metrics stand out :
Enterprise Value/Revenue: 3.33 (TXN) vs. 2.42 (FSL)
Enterprise Value/EBITDA : 10.80 ( TXN) vs. 13.65 (FSL)
Simply put, FSL is highly leveraged but not delivering commensurate sales growth while having a built-in impediment for EPS due to the need to service its debt.
Even if EBITDA margin grows to catch-up with TXN's ( a very unlikely IF..)at the moment FSL is about 25% overvalued. Any comments ?
By the way, when I wrote the above, I was aware of the results. At this moment, FSL is up nearly $1.50 or nearly $360M in market cap. As a reward for beating a sales number by a couple 10's of millions, and a net loss of $9M in Q1 vs what could have been worse, I suppose. The market is a strange beast, I wonder how Graham would value such a stock.
The negative book value is quite the attraction for me. Next we have a company that needs the current upturn, now in its 4th year, to continue for 4 more. A company that has lost market share consistently for over a decade. Semis are a maturing market, the days of 14% CAGR are over.
Basically everything is about flat, except for a positive Microcontroller division selling 177 mil versus 149 a year ago. That seems to be the only positive news.
I'm still not sure about the 254 mil in Automotive Microcontroller versus 240 mil a year ago. But it is better than being flat when the US auto market is growing at a bigger pace. Yet, this does not signal an aggressive market share capture by FSL.
Let's see my guess:
FSL Financial (in M$)
Revenues 967 957
Gross margin 391 375
% GM 40% 39%
SG&A 115 110
R&D 180 186
Restructure 28 20
Operating earnings 68 59
Other expense -145 -127
Net income Q -77 -68
The fab isn't the only area to improve gross margin. As an example, if the test times haven't been optimized for any of the products, then the manufacturing floor runs at full capacity and they have to buy more handlers and testers. Freescale has never made any serious effort to implement the highest efficiency for manufacturing. So that right there is worth several percentage points.
Design has never made any serious effort for BIST or testability. The mentality of Freescale is changing because of the new management.
Sentiment: Strong Buy
What I do know is that I work in the semiconductor industry. What you say is a simply an urban myth about the gross margin. Silly.
The gross margin of FSL is heavily dependent on the factory efficiency. You surely did not know that FSL is not fabless. So do not compare its gross margins with those of the fabless semi companies. FSL is fablite. In fact it is not so lite as they FSL would want. In 2012, they manufactured outside only 30% of their production. The rest was in 3 of their fabs. Their fabs are old. In the last 2 years FSL demolished three other fabs: East Kilbride, Toulouse and Sendai. They tried very hard to find a buyer for these junks but nothing. The only luck came from the Fukushima earthquake which severely damaged the Sendai fab which was not operational at that time (in conservation, looking for a dream buyer). The only money FSL saw on those fabs was from the insurance companies which paid several tens of mil for damages of a ZERO valued factory.
So, the gross margins cannot double as you said. That is stupid. At best, they can grow to 42, maybe 45% from their current 39%.
Don't be shy, do continue this conversation but the case of gross margins doubling is just silly.
You must not know much about the semiconductor business. Most of the business models are: Rush to get the product into production, and then move the engineering team onto the next product. Improving gross margin doesn't occur much without the support of the design and engineering teams.
So if you mandated that the whole team needs to improve the gross margin to hit a specific target, you would have an improved gross margin.
I follow this company more than just closely. "doubling their gross margin" is just a lie. If you want to have a serious conversation please be specific and we can discuss any topics. The company is reasonably good for a certain price (like about 10).
i was doing some reading on what they offer, looking to see if their business aligns with any broader trends swinging into view. there are many mentions of their products playing a role in the 'internet of things' as more devices are reactive and wired to the internet, but i'm having trouble figuring out whether they are really in a unique position to benefit disproportionately.
I wish I could offer something. I bought at 15.50 as it rose from its last pullback. Now this pullback is deeper than the one where I bought. My patience is getting thin because it has broken my model now.