For the last 90 days, the PPS has fluctuated in a 15% range based on poor confidence in the company's margin performance or a new poor confidence in Samsung and Apple and China. Now incremental positives are being demonstrated in revenues and in margins, with more to come, and China is not a factor in hitting the September guided numbers, nor is any one flagship device.
So what gives?
Does the market return to its green visor tomorrow and readjust PPS for the better numbers and prospects of Rfmd?
If so, the PPS should move with confidence to $5.90, and then move again to near $6.50, with most of the next 90 days spent around $6 as the low-mid-way point of earnings guidance.
However, what the market did the last 90 days with Rfmd fundamentals is no guarantee of how the market will look at Rfmd fundamentals the next 90 days.
I think the news will get better as new products and Rfmd content become known. That might push the PPS towards $6.50 for some of this quarter.
I hope so but take for instance cash flow: only 7.2 m on 293 m of revenues. Swks had 65 m cash flow on 436 m of revenues. that is the quality of earnings which is completely lacking at rfmd. okey from now on gm should creep higher. We shall see how the market reacts tomorrow but my guess is that funds will choose for swks.
Furthermore, if Rfmd's intention is to stabilize the PPS, then these conservative guidances and hitting them or exceeding them slightly will do that over a few quarters more. If what Rfmd says is true about no one customer or no one device or no one country market being able to destroy their revenues, then that too will breathe stability into the share price. Lastly, control over margins seems to be a major focus now for the company. Even Creviston was talking about it.
Stable revenues based on megatrend growth and diversified customers and products + stable to increasing margins = stable stock price or increasing stock price.
This method and strategy over time will reward the Rfmd investor. At least now, the horrible plunges in PPS appear to be over. (I can't believe I'm writing this about Rfmd, but I see their methods finally gaining traction.)
RFMD gross margins are at 31% while SWKS gross margins are at 44%. RFMD has some margin improvement work ahead of them in order to gain more respect. They are working on it but how much and how soon remains to be see. The shorts are wasting their time here.