The company has $200M revenue per year, hardly reaches breakeven (zero profit in last Q).
The income generating patents will expire in 2010 based on TSRA's PR. I'm not even mentioning the ongoing reexams on patents.
TSRA has about $200M cash.
I'm seriously interested why would anybody think that this company is worth more than $400M (or $10/share)? Even on that price you would pay a high premium.
The current price reflects a baseless optimism that minimum $800M extra profit will come in from settlements or future operations.
I'm still holding my short position at high 19s.
I'm really curious to hear arguments from longs why it is a good buy at the current price.
I would appreciate if all could leave out personal attacks from this topic, thanks!
You said that the wording of the decision was more important than the monetary award.
Well, the words were strongly in TSRA's favor.
The GLOBAL stock crash made you lucky. You were not right.
Maybe it's better to be lucky than right. But, please stop claiming to be both.
No one would begrudge you being lucky, if you didn't act like such a jerk.
"Do you get a bit nervous when the weekend comes?"
Do you mean by seeing a second non-final rejection on the '893 patent on Monday? I'm not really nervous about that but thank you for your asking :)
Have a nice weekend (seriously)!
'Very likely the wording of the decision will be more important than the monetary part.'
Wow thats bold. I'm not buying that one. $120M speaks volumes. $200M speaks even more. $1 and no matter what the wording, 'the street' sees it as a loss. So what makes you believe you'll get a look at the wording of the decision? Its an arbitration, not a public trial.
'If the arbitration panel referred to reexam decisions and used it as an argument for giving a reduction to Amkor the share price would be hit again.'
Assuming you would even know what they based their decision on, this could only be a precedent setting event. Its like denying someone car insurance because they might be in an accident in 5 years. Please present any single case where a non-final decision was used as a basis for ANY related FINAL decision. You have used this argument ad nauseam and I have yet to understand how anyone in their right mind can think this way. Patents are valid AND ENFORCEABLE until rejected and all appeals have been exhausted. By ignoring the facts you're only hurting yourself, but its your money.
You've seen the last of the low $10's once analysts are stating its worth $28 even if all legal decisions go against them. It could drop again, but low $10's is history. It closed under $15 a total of 4 days, when NOBODY understood what the legal ramifications were. It was a blip, and that was that. Not a single analyst has downgraded, not one has a price target below $27. Everything we have seen have been upgrades and positive sentiment, do you think anybody worth their salt could keep pumping a doomed stock without risking their jobs? Even during these naked short days, you still cant get the price down. I view this as an extremely risky play to the downside.
I couldn't disagree more that a long position is riskier than a short right now but you've been on the same bandwagon for months and I wouldn't expect anything less. If the AMKR decision is in TSRA's favor, you're really toast. And the ITC hearing is only an evidentiary hearing, why you think you're getting some big news out of that is beyond me. The only thing they can really cite is lack of evidence, and there's plenty of that.
But at least you admitted you were wrong. The first step in recovery is admitting you have a problem.
I agree with most of what you are saying.
I was clearly wrong recently betting on the market reactions on PTO's non-final rejections.
Amkor: I have always agreed that Amkor will pay something at the end of the arbitration. But getting 5M or 200M is quite a big difference, especially when the market expects something around 100-120M. Very likely the wording of the decision will be more important than the monetary part. If the arbitration panel referred to reexam decisions and used it as an argument for giving a reduction to Amkor the share price would be hit again. Just like when the ITC Judge ordered the stay because of the reexams.
The current optimism is based on the argument that PTO decisions won't matter anymore because of patent expiration and long appeal procedures. If Amkor or the ITC decision in October contradicts this argument the share price will be back to low 10s again. This is the reason I'm going to hold my short position till October 20.
I still think that Amkor & TSRA will settle because that serves the best TSRA's interest and that would be the least risky strategy for both players. Question is for how much and based on what terms. Rumor has it that TSRA already approached Amkor a month ago with a settlement offer but Amkor rejected it, of course it's only a rumor but it makes perfect sense.
In my view, everything considered, holding a long position now till October is a riskier strategy than being short. The price may go up to 28 in the best scenario but the downside risk is much bigger if anything adverse happen.
Being a conservative player, I would do what I am doing: buying long and selling at the money or out of the money short term covered calls. If it breaks to the high side on a favorable outcome, I'd buy more and sell more covered calls. If it tops $45, I start thinking about going short.
IMHO, the optic market is crowded, so I don't see a company there and all the real ip brains that made the company are gone. In two years, so will the main patents. However, I think this old horse has one more good race in it before it goes to the glue factory.
Selling covered calls limits your upside potential quite a lot. It's more like collecting interest on the held shares, sure but small profit as long as the price remains stable or goes up.
Am I getting your strategy right?
Investorpatent wrote >>>I'm really curious to hear arguments from longs why it is a good buy at the current price.<<<
Brett Hodess of Merrill recently summarized:
>>>Price objective basis & risk
Our $27 price target represents our valuation expectation for the stock prior to the
resolution of its outstanding litigation. The valuation is based on 18x our 2009
EPS estimate, in-line with the P/E for profitable, growing semiconductor related
stocks and only 12x our 2010 estimate. Our 2009 estimate should be achievable
even if TSRA lost all of its lawsuits, making this a very conservative valuation
argument. We believe the company's past wins in each of the patent disputes
create very good odds that they will get favorable decisions or settlements in
these cases which would boost both earnings and the valuation multiple.
However, losses of these cases or negative patent office re-examinations could
prohibit the stock from reaching our price objective even if estiamtes remain
unchanged. Litigation expense is unpredictable and could exceed our estimates.
Weakness in semiconductor unit sales of DRAM or wireless chips could also be
risks to attaining the price target. Acquistion integration risks and costs
ascociated with new businesses could also impact earnings and prevent the price
target from being reached.<<<
Thanks for the Merril report!
It's interesting what they are saying and from share price point of view the stock is nearly there. So clearly they have been right. Do you know when was this report issued?
My question is: why they count 18x earnings when even TSRA says the patents will expiry in 2 years and most of the licensing contracts in 4 years. Wouldn't it make more sense in such a case a lower multiplier like 5?
(Of course cash on hand and any other assets should add to the calculation)
Opps, I just read your comment. I think it is a good analysis with a whole lot of cya statements, all of which I keep in mind. To me, TSRA is like Sylvester Stallone Rocky movies where you substitute aging patents for aging boxers. TSRA needs to come up with a new and younger Rocky or the box office is going to start dwindling.
I haven't seen any legal decision going to TSRA favor recently. The only thing what happened is that the share price went up after the earnings. I can't explain why, even some longs here seemed to be surprised as well. Maybe the leaked Staff report made the trick.
The first legal decision will be Amkor and than ITC in October.
I hope we get the Amkor decision soon, I will be the first to admit that I was wrong if TSRA gets anything more than $5-$20M (my previous prediction). The current share price reflects a major victory (above $100M) for TSRA. Theoretically anything possible between 0-200M.
So let's remain optimist, $200M is coming from Amkor. Would that be alone enough to justify the current market cap?