SSTI: an earnings surprise tomorrow?

The stock just crossed an analyst's price target:

«Silicon Storage popped 62 cents, or 18%, to close at $4.13 after analyst Daniel Amir raised his rating on the shares to buy from sell while setting a $5 price target for the stock.»

SSTI closed today at $5.14. It is a bullish factor that the stock is trading higher than a bullish price target set by an analyst, perhaps many people sold at the price target area and now they see the stock climb further and must jump back in, creating further advances in the price. Reading the motives behind the analyst call I believe he was too conservative on the price target: Silicon Storage spikes on upgrade - Apple deal among catalysts seen by WR Hambrecht

Results will be out tomorrow after the close. Guidance from the company isn't great:

«Second Quarter 2005 Outlook

SST expects its second quarter unit shipments to increase slightly from the first quarter. In addition, the company expects average selling prices to decline by four to six percent. Licensing revenue is expected to be down slightly from the prior quarter. Therefore, SST expects its second quarter revenues to be between $80 million and $90 million, assuming no drastic changes occur in the U.S. and international economies. Gross margin is expected to be between 11 and 15 percent, which takes into consideration the risks associated with market condition changes. Research and development spending is expected to be approximately 10 percent higher than the prior quarter. In addition, the company expects a $4 to $5 million charge as a result of the Actrans acquisition. With these revenue and expense levels, SST expects net loss per share to be between $0.20 and $0.28 in the second quarter.»

Yet the stock keeps rising prior to results and the trend has turned bullish again:

I guess this baby will pop on earnings. Expectations are low so there's only one way if we get some of a positive surprise, and that is way up !

I've decided to buy SSTI for the 3 Stocks on Fire Portfolio at today's open.

3 Stocks on Fire Community take on SSTI

This analysis is part of Top 5 Stocks for Tuesday, conducted by David Randolph from 3 Stocks on Fire. David Randolph is managing a public and diversified portfolio which is up 144% since May 2005.

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