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I'm posting this before SIMO gets away from everyone as its recovering faster than I'd hoped. I will continue updating.
"Put on your bull glasses and SIMO gains" - Dr. Doolittle, animal ophthalmologist
Silicon Motion is the leading maker of controllers in the memory, storage markets, and specialty RF. Their chips power data centers, mobile devices, SSDs, autos, and multimedia hardware (video walls, tablet tech, medical equipment, etc). Their customers are key members of the supply chain (i.e. Micron, Samsung, SK Hynix, etc) and supply some web service providers directly (I.e. Alibaba). All of their customers are ramping production, further accelerating demand for SIMO's products. Micron accounts for 25% of SIMO's revenues.
SIMO is significantly undervalued at current levels, getting caught in the indiscriminate market-wide selling over Q1 that has brought semis in to bottom barrel valuations.
This has created an AMAZING opportunity to not only double dip, but also enjoy even stronger tailwinds from even better fundamentals than we had in Q4!
I want to expedite the delivery of this DD, and I'll be beefing this section up throughout the day. For now, let me reiterate my Q4 investment thesis:
This is a derivative play on memory (Tip: supply chain stocks always have more leverage) and a superior play for cyclical upturns (we are now entering).
What do I mean by derivative play? Imagine Micron is a SpaceX rocket taking off. Close your eyes and feel the experience of starting the boosters, lifting off, and gradually accelerating to space. Now imagine SIMO is a monkey strapped into a shopping cart connected to that rocket by a long chain that suddenly goes from 0 to 99,999mph. Get it? Got it? Good.
More importantly/hilariously, management has continued to keep racking up sales from strong demand all year which has proved resilient despite memory market softness and all while gaining new production capacity. Somehow, analyst estimates reflect neither of these factors. Mgmt guided $1.5B in backlog being pushed into 2022, yet according to analysts $1.5B in future sales is only worth $1B in sales on their estimates. Also worth considering, if this year was a FUD cyclical trough, and next year is a reacceleration period into a decade of increasing memory demand, then 2021's $1B in sales probably wasn't "peak", was it? I'm no rocket scientist, but I'd say no.
In other words, EPS estimates and valuation expansion are heading SIGNIFICANTLY higher.
Luckily, Needham modeled this for us:
Bottom line: SIMO is a monkey in a shopping cart about to be jerked up significantly by the recovering memory cycle during another decade of secular, exponential growth in memory needs from datacenters, EVs, consumer tech, mobile, and literally every facet of human life. This is a real stock that attracts real hedge funds. Get in early or forever hold your peace.
Also, at an almost 3% fwd div yield vs the S&P's 1.3%, you and every dividend-loving Boomer PM can even get paid to hold shares <3
My post from November 2021: https://www.reddit.com/r/wallstreetbets/comments/r25o8a/tickle_me_simo_mega_memory_upside_v2/
Fwd P/E '22: 9x
Earnings Growth Est: +41% '22
Fwd P/S '22: 2.22x
Revenue Growth Est: 24% '22
EBITDA Growth Est: +111% '22
Free Cash Flow Generation: +46% '22
Analyst Price Target: $110
SIMO is currently rebounding after being caught up in the indiscriminate selling of the Q1 correction which drastically displaced it from underlying fundamentals. This is precisely why this oppty exists. It's currently exiting a downtrend and seeing strong relative strength gains vs its industry & sector.
See Appendix for charts.
Once again, a long list of event catalysts around the corner.
Key Supply Chain Ers (~50% of Revs represented)
Targeting a range of prior highs $97 to technical breakout to $110. Using ASK prices for returns (you likely get improved pricing, meaning higher final returns). Profits = % Gains - 100% (ex: if you double, that's a 1x profit).
Gen X/Boomers: Buy stock! No brainer. Likely 40-50% upside from here
Risk-Averse: June C75 returns profits of 3.5x-6.5x
Quasi-Risk Averse: June C85 returns profits of 5.6x-11.5x
Pump It Up!: May C80 returns profits of 6x-10.5x
Super Pumped UP!: May C85 returns profits of 8.5x-17.5x
WSB Delight: This is why you come here. If the conference acts as strong a catalyst as they did in Dec & MU earnings are enough to rocket this thing back to $85-95 (entirely possible), the best way to play is... April C80. These are trading so cheap, that a sprint back to $85-95 (15-30%) in the next 4wks would return 7.5x to 24x.
I'm continuing to buy all of the above.
Required Daily Avg Moves through Exp For Target Ranges
Moving averages & Q1 downtrend line from market-wide indiscriminate selling. A continued recovery will turn that 50D back up toward the 200D, forming the golden cross which is usually good for a technical-driven boost. Pink line is downtrend, which was decisively broken on 3/16. RSI also picking up as institutional buyers return to the stock after waiting out Q1 volatility.