3SOF

Have you ever been punished for a misdeed somebody else did?

Well KOMG has been punished because Hutchinson guided lower citing weak demand: http://biz.yahoo.com/bizj/050830/1157601.html?.v=2

It fell from 37.5 down to the support at 32.5 (13%). It is always important to follow sector news when you consider to buy a stock. Not only can it warn about potential weaknesses or strength in the sector but it can also offer great buying opportunities,

In the case of KOMG I think the drop was unwarranted. I have therefore bough at 32.57.

KOMG designs and manufactures thin-film media or disks that are incorporated into disk drives. On July 27 the company said:

Quote"Overall demand remains very strong entering the traditionally seasonally stronger second half of the year. As we are currently running at full manufacturing capacity of approximately 27 million disks per quarter, we expect revenue to be similar to the prior quarter. Net margin in the third quarter is currently expected to be approximately 16%, without giving effect to any potential impact of exchange rates.

Based on very strong demand that currently exceeds our manufacturing capacity and expected continuing strong overall market growth, we are in the process of expanding our capacity by approximately 4 million disks per quarter. We expect initial incremental capacity from this expansion in the fourth quarter of 2005 and total capacity of approximately 31 million disks per quarter by the end of the first quarter of 2006.

Now that doesn't sound like a company that is experiencing a drop in demand does it?

In fact one of the biggest problems until now in the HDD industry is the supply of thin film disk. Merrill Lunch was not late to inform their customers:

QuoteImplications for Komag: Although Komag shares are trading in sympathy with Hutchinson, please note that disk media remains the bottleneck. Also note that Hutchinson missed its June quarter target, whereas Komag positively preannounced in June.

and Piper Jaffray followed up:

QuoteKomag (KOMG) is down nearly 4.3% on the news and represents a great buying opportunity at these levels trading at 9-10x forward earnings. Our analysis indicates
that Komag is being unfairly punished on the heels of the Hutchinson pre-announcement. We believe that Komag will easily make the quarter given the strong demand for its products on the back of continuing substrate constraints. Reiterate Outperform and $40 price target (12-14x P/E, 1.4-1.6 P/S). Risks include slowdown in desktop PC HDD demand, oversupply of media capacity or a fall-off in enterprise HDD demand.

And then today Zack upgraded the stock to strong buy:

QuoteCHICAGO--(BUSINESS WIRE)--Sept. 1, 2005--Zacks.com releases another list of stocks that are currently members of the coveted Zacks #1 Rank (Strong Buy) List. The #1 Rank stocks highlighted today are Helmerich & Payne, Inc. (NYSE:HP) and Komag, Inc. (NASDAQ:KOMG).

Komag, Inc. (NASDAQ:KOMG) released its report for the second quarter in late July, stating that overall demand for its products from all four of its major drive customers was extremely strong. Second-quarter earnings of 93 cents per share topped the consensus estimate by approximately 13% and outperformed last year's result. The company exceeded the consensus estimate each time during the past five consecutive quarters.

I will write a bit more about the company over the weekend but let me finish we the chart:

Nice opening this morning. We might be helped by Jim Jubak's comments:

QuoteJubak's Journal

By Jim Jubak

I'm going to ignore my own stop loss at $33.60 on shares of Komag (KOMG, news, msgs) and hold on because I can't find any fundamental reason for the decline. It's likely investors will have real news from the company in the next few weeks, and I'm willing to go with these shares until then. Shares took a beating on Aug. 30, falling 12.2%, on news that disk-drive suspension maker Hutchinson Technology (HTCH, news, msgs) had lowered its estimates for that company's fourth fiscal quarter that ends on Sept. 25, 2005. I think the issues raised by Hutchinson Technology are specific to that company and don't indicate any problems in the quarter for Komag. I'd use the weakness to buy shares of Komag. (I'm buying shares on this weakness myself.)

Hutchinson Technology cut its sales estimates for the quarter to 170 million-180 million suspension assemblies from an earlier estimate of 190 million-200 million units. That weakness in demand, plus a shift in revenue mix toward products that carry a lower profit margin, will reduce gross margins to from 19% to 23%, from an earlier estimate of 28% to 30%. I don't see any signs that the weakness in demand for Hutchinson Technologies suspension assemblies carries over to the hard disk-drive media produced by Komag. Channel checks by Wall Street analysts show five to six week inventory, improving sell through, and slightly higher selling prices. Remember that just this happened in the June quarter when Hutchinson Technology missed estimates and Komag positively pre-announced. As of Sept. 2, I keeping my $48 price target by December 2005 on these shares and removing my stop loss. (Full disclosure: I own shares of Komag.)

The Company announced yesterday that they are going to Present at Citigroup's Technology Conference on September 8 and I am pretty sure that they will confirm their earnings forecast on this conference.

KOMG has been on my watch list for a looong time. I was therefore very pleased when I got a buying opportunity last week.

I posted a white paper about Momentum Investing on the "Stock Market Talking" Board over the weekend (http://www.3stocksonfire.org/trading/index.php?topic=2565.0). KOMG was one of the stocks that came to my mind when I read the paper.

It has certainly outperformed 85% of all stocks:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=4825;image)

Net Income is rapidly increasing:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=4826;image)

The only flaw this share has according to the paper is a PE of only 14 but I can live with this : (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=3073)

Merrill Lynch raised their estimates on Friday. I can't remember last time an analyst raised earnings estimates for a stock that has fallen 20% over the last 5 trading days. That takes a lot of balls having in mind that the drop was initiated by earning worries:

QuoteHighlights:

• The share price of Komag has declined by about 20%
( $8 ) from $40 recently, which we attribute to: A)
concerns regarding Hutchinson's negative
preannouncement, and B) anxiety regarding
disappointing mid-quarter updates from the HDD
sector next week. (See our accompanying MXO
note.)

• Reiterate Buy. We believe that Komag's CQ3
remains on track and we consider the shares to be
particularly attractive following near-term weakness.
Shares could exhibit further weakness over the next
few days (due to concerns about next week's updates),
but this should be short-lived.

• 160GB/platter is a negative for SAs, not media.
According to our checks, Seagate started shipping
160GB/platter desktop drives to the distribution
channel last week. These drives shipments are more
negative for suspension assembly companies than for
media companies. For example, an 80GB HDD
usually ships with 2 SAs and 1 disk platter. Using 1
side of a 160GB platter, an 80GB HDD will only need
1 SA (vs. 2 before), but will retain a single disk.

• July HDD production data not too negative
regarding Komag's CQ3. The sum of HDDs
produced by Komag's customers declined by 3% in
July compared to April, according to TSR. A 3% seq.
decline in shipments in CQ3 would only amount to
800K less units, which impacts CQ3 EPS slightly by
$.03 (out of our $.89 estimate). As we believe that
demand for media outstripped supply in CQ2 by at
least 800K units, the results from TSR support the
company making its guidance.

• We are slightly tweaking our FY05/FY06 EPS
estimates from $3.21/3.84 to $3.23/3.86.

July HDD Production Data
July production healthy, but US vendors losing share to
Asian vendors. HDD production data for the month of
July from TSR suggest a fairly healthy overall HDD
environment (up 3% in overall HDD units comparing July
with April) with strength from 2.5" drives but continued
weakness in 1" drives. On the negative side, US-based
vendors (STX, MXO, WDC) appear to be losing market
share to Asian-based vendors possibly due to the mix shift
from desktop HDDs to notebook HDDs. Notebook OEMs
Toshiba and Fujitsu will obviously use their own mobile
drive products before using others.

Maxtor losing share to WDC and Seagate. We note that
both WDC and Seagate showed production growth in July
vs. April in the low to mid-single digits while Maxtor
declined about 19%. The growth exhibited by Maxtor in
July from June is due to an easy comparison as Maxtor's
June production was also quite weak.

Price Objective Basis and Risk
We derive our $42 12-month price objective on shares of
Komag using a DCF analysis. Our 10-year DCF analysis
assumes a long-term revenue growth rate of 5.0% and
gross margin of 26.5% in the terminal year. Applying a
12.7% discount rate the company's current value results in
a 12-month price objective of $42.

Risks to our price objective are:
1.) Increased competition from Showa Denko and
Fuji (to a lesser degree)
2.) A high degree of customer concentration, especially
to Maxtor
3.) Tax credits expiring beginning in C2006,
4.) An inability to ramp well in mobile and SFF HDD
markets
5.) Slower PC growth.

We will most likely get an earnings update at the Citigroup Conference on September 8 so they most be very confident in their estimates!

It seems this is developing into a monologue. Interesting that nobody can see the potential in this stock (or maybe you guys are just to busy buying  ;) ).

As David says the market is always right – that is except when it is wrong (my addition). In the case of KOMG I believe the market was wrong and that the market has realized its mistake and is correcting it.

Still a long way to go though. Following the trend it seems like it will go up to above 40 when/if the earning forecast is confirmed on September 8. That is still 20% over a few days.....

Maxtor had their mid-quarter Conference Call after the close yesterday.

It was a great CC for KOMG! Maxtor emphasized their strong relationship with KOMG and that they might use KOMG to help on media shortage in second half of 2005! They specifically mentioned that KOMG orders would increase in the future when KOMG has expanded the production capacity (KOMG biggest problem right now seems to be that they are running on 100% capacity - still wondering how anybody can be worried about earnings  ::))

They also said that they experience a strong demand for HDD and that inventories in the supply chain is down to 4 weeks.

This was the last confirmation I needed. I will add to my position this morning.

As mentioned elsewhere I have sold all oil stocks and is rotating back into High-tech like KOMG and CKCM (added today) and Biotech (SVA is on fire!).

Mike

What do you make of all the insider selling in August?

http://www.insidercow.com/

Hi Fwhp

I always check insider activity before I buy a stock and I certainly did that with KOMG.

You are right that insiders have sold in August. In fact they have sold shares every month for the last 13 months and it doesn't bother me at all!

The insider activity has been exactly the same since the stock was at 12; it has since increased 300%. The point is that insider activity in case of KOMG gives no indication about the future development of the company.

There can be a lot of good reasons why insiders sell shares: diversification, to support their lifestyle or it can even be a recommendation from the company.

So the jury is out and the insiders are innocent  ;)

Thx for your response.  I know insider selling is not as important as insider buying b/c there are many reasons (like you said) for one to sell.

Good luck...on my watch.


laterz...Jody

Nice pick!

Did you buy on the gap up?

Thanks Ehos

No - I didn't buy at the opening (my limit was too low). I have now increased the limit so we will se. As this stock is moving I might just have to buy without any limit.

Thank you Mike.
Nice call on this.  I got in just below 34.  I don't know how long I'll hold on to it, but it's been great so far!
Brigitte

Up on the day, but down after hours.

A nice chance to buy in low?

Hi Ehos and Brigitte,

First of all congrats to Brigitte with the buy. I really think 34 is an excellent entry price.

Ehos I think it will fall back a bit during the trading today. That is at least what I hope. I didn't manage to buy yesterday. This was not due to lack of efforts; I increased my limit three times.

I mentioned the Maxtor CC yesterday and here is the Analyst response:

Piper Jaffray

QuoteMedia Shortage Continues To Benefit Komag: Maxtor's internal media
production issues continue to suggest continued aluminum media constraints for the
foreseeable future which continues to be a positive for Komag. Given that Komag
is operating at full capacity, we note that Komag probably will not see upside from
Maxtor orders this quarter but we do note that such problems will continue to keep
Maxtor dependant on Komag for a longer time than expected. Maxtor plans to keep
its share of media sourced from Komag at the ~50-60% of internal capacity range
for the foreseeable future.

Bear Sterns

QuoteKey Points
Owing to a MXO-specific manufacturing glitch, it lowered its 3Q05 guidance. While the industry dynamics remain healthy (ironically, MXO issues could be positive for the industry), we're maintaining our Peer Perform rating owing to valuation; we prefer to own KOMG, which is better positioned to benefit from seasonal strength given media shortages.

Thomas Weisel

Quote• Komag benefiting from tight platter supply. We believe Komag remains at an attractive valuation of 10.2x our CY06E EPS. The company is benefiting from tight platter supply, as indicated by Maxtor's announcement tonight of a shortfall in its own internal platter capacity leading to missed revenue. Maxtor's problems seem to be in higher capacity aluminum drives, an area dominated by Komag. We remain comfortable that Komag will meet or exceed our estimates for the remainder of the year despite limited potential for unit upside because of capacity limits.

• Maintain Outperform ratings on WD, Komag and Seagate. We beliveve Seagate, WD and Komag trade at attractive valuations of 11x, 10x and 8x our respective CY06 EPS estimates and are best positioned in the near term in terms of product positioning and ability to execute.

and then after close came the long awaited message from Komag:

QuoteKomag reiterates revenue, margin forecast
Wed Sep 7, 2005 06:01 PM ET

SAN FRANCISCO, Sept 7 (Reuters) - Komag Inc. (KOMG.O: Quote, Profile, Research) , a maker of media used in computer disk drives, on Wednesday reiterated its third-quarter revenue and profit margin forecasts, saying market demand remained strong in the second half.

In a filing with the U.S. Securities and Exchange Commission, the company also said it is currently running at full manufacturing capacity of about 27 million disks per quarter.

Calling for revenue to be about flat with the second quarter and net margins of about 16 percent, Komag repeated a forecast it gave in July.

Komag shares rose $2.00, or 5.8 percent, to $36.45 on Nasdaq in regular trading. In after-hours trading, the shares gave up 95 cents to $35.50.

The share should shoot up from here but as said I hope we will see a little profit taking till the Analysts reiterates their strong buy recommendations and the market takes it back to the forties.

OK so here are the analyst recommendations:

Piper Jaffray

QuoteKEY POINTS:
• Reaffirms Previously Provided 3Q05 Guidance; Upside To 3Q05 Guidance
Possible: Prior to speaking at an investor conference today, Komag put out a
press release yesterday re-affirming guidance for 3Q05 which was exactly the
same as the guidance provided during its 2Q05 earnings call. The Company
expects 3Q05 to be "similar to prior quarter with net margins in the 16% range."

As we have noted, we believe 3Q05 guidance is conservative for the following
reasons: 1) the Company is entering 3Q05 with 27M of capacity - it entered 2Q05
with approximately 22M of capacity which was expanded to 27M during the
course of the quarter; 2) the Company has approximately $8.8M of finished
goods inventory, which could translate to approximately 1.5-2M finished disks
(assuming 25% gross margins, ASPs of $5.55). However, this number could be
lower given that we do not know the exact mix of substrates versus finished disks
in finished goods inventory. But we note that the Company probably has the
ability to ship at least 1M disks from inventories alone; and 3) the Company is
currently assuming zero capacity expansion during the course of 3Q05 - we find
this to be a very conservative assumption.

• Running At Full Capacity; Capacity Expansion Underway: The Company
shipped 27.6M units during the quarter and is currently running at full capacity.
The Company plans to increase capacity by approximately 4M disks per quarter
through the end of 2006. Incremental capacity from this expansion is expected in
4Q05 with capacity of approximately 31M by end of 1Q06 and 40M by end of
2006.

• Reiterate Outperform And $40 Price Target: We believe that Komag will
easily make the quarter (and potentially beat it given its inventory position) given
the strong demand for its products on the back of continuing substrate constraints.
Reiterate Outperform and $40 price target (12-14x P/E, 1.4-1.6 P/S). We would
be buyers on weakness.

Bear Sterns

QuoteKey Points

While not as ebullient as 2Q05 pattern when the company raised estimates twice intra-quarter and beat that guidance), KOMG reiterated its revenue/EPS guidance in its mid-quarter update. We are maintaining our estimates and our price target of $49 and see KOMG as the best way to play unit demand in the hard disk drive sector given strong unit demand and industry-wide shortages of magnetic media.

KOMG is a play on the strong secular growth in drive unit demand, though the story is contingent on its successful ramp of finished disk capacity (to 31mm by 1Q06 and 40mm exiting '06) which is largely accounted for by customers. Absent an industry downturn, increased supply or order cancellations, if KOMG can fill its planned capacity additions, we see potential for significant upside from here.

Identical to its comments in July, KOMG said it is running at full manufacturing capacity of around 27mm disks per quarter, implying revenues flat with 2Q -- and net margin around 16%. We are maintaining our estimates for 3Q05 of $0.90 vs. $0.32 last year on sales of $177mm (vs. $173mm in 2Q) -- we see upside from mix, for 2005 at $3.30 on revenues of $675mm and 2006 at $3.75 on sales of $807mm.

In contrast to tone of weak demand from HTCH, which makes suspension assemblies for drives, KOMG noted that it expected overall market demand to remain strong for the industry -- consistent with channel comments we have gathered -- but capacity does not come on-line until 4Q05. While we are mixed in our view of drive vendors given limited upside, we like the capacity expansion story here.

While risks remain around a slowdown in hard drive demand, execution on adding capacity, and KOMG's customers adding internal media capacity, secular demand dynamics are improving and supply conditions remain tight. Applying a 13x P/E multiple to reflect stronger growth and better execution – on our '06 EPS of $3.75 yields our target of $49.

Compelling Valuation: Given the continued favorable supply/demand dynamics in disk media, we are maintaining our price target for Komag at $49 by applying a 13x P/E multiple, which is still a discount to the S&P market multiple. We believe that a 13x multiple is reasonable given the secular demand dynamics for KOMG continue to improve and near-term media supply conditions remain tight.

Well looks good to me and it seems like I can get my shares cheap today  ;D

Bought @ 34.60  :D

Mike,

If KOMG looks undervalued today, think how undervalued it was at 9.42 in August, 2004, before it rallied 330% into August, 2005  :o

QuoteJubak's Journal

By Jim Jubak

I'm going to ignore my own stop loss at $33.60 on shares of Komag (KOMG, news, msgs) and hold on because I can't find any fundamental reason for the decline.

This is suppostion on my part, but given that spectacular gain in just one year, I think that the market is digesting those gains, or "selling the good news."  In other words, the market response is, "Yeah, that's great news on earnings and the future outlook, but we've already factored alot of that in when we rallied the stock 330% over the last year."

I like Jubak, and I don't mean this as a personal criticism, but KOMG has been breaking alot of support near his $33.60 stop, and this where TA can be a big help.   If the chart is breaking down, "Don't get married to a stock."

KOMG closed yesterday at 29.25, below three levels of support.

Melf Elf,

You are absolutely right. That reminds me how much Stock investing is about perception. KOMG and STX are both as undervalued now as they were in August 2004. What have changed is not the fundamentals but only the mood of the market.

Here is the good news mood swings with the wind but fundamentals are more sustainable. Try to look at the Komag chart below. I am sure I could show that the trend is still positive (which I believe it is) with a little artistic freedom. but the market in this point in time has decided that Hard disks are going to be history. From my point of view this is quite surprising as all the laptops and MP3 players I have bought still have this funny sound of a HDD and both stocks are growing at quite phenomenal rates.

Anyhow this is all about perception and I have experienced a sharp drop in the number of applauds since I changed my picture from Lulu to Sahsa.

Sasha is my oldest dog - a genius in the dog world! She is probably more intelligent than most of the investors in the stock market today. Intelligence doesn't count though - It is all about perception so I am changing back to Lulu. Lulu is a labradore (Sasha is an African Liondog) Lulu is extremely Charming but I woldn't ask her for stock picking advice (Sasha is my prefered choice for this after my wife (that is why i hold more France stocks than US stocks!!)

Anyhow after several requests (one) please welcome Lulu back - she really is cute!

Quote from: Michael on October 03, 2005, 06:38:59 PM
Melf Elf,

You are absolutely right. That reminds me how much Stock investing is about perception. KOMG and STX are both as undervalued now as they were in August 2004. What have changed is not the fundamentals but only the mood of the market.

Hi, Mike,

Good point about perception and the mood of the market.

QuoteI am sure I could show that the trend is still positive (which I believe it is) with a little artistic freedom. but the market in this point in time has decided that Hard disks are going to be history.

I agree with you that the long-term trend is still positive.  Further, if KOMG does go down near the H&S Top target, the trend still would be positive if it finds support in the 22-24 area.

Shorter term, though, KOMG has some technical difficulties to overcome.  Since my last post on Septermber 23, it looks as though KOMG has undergone an A-B-C corrective rally of the 28% decline from 40.50 to 29.17.

What is an A-B-C Corrective Rally? (start at the black arrow on the chart):

It "corrects" the stock higher after it has had a move down, in this case, a 28% decline in KOMG.

Leg A is a rally.  That's the 2-day rally from September 23 to September 26, marked "A" on the chart.

Leg B is a selloff.  That's the 2-day selloff into September 28, marked "B" on the chart.

Leg C is another rally.  That's the 3-day rally to October 3, marked "C" on the chart, that got the stock back above the neckline for one day, putting it "in the neutral zone" for one day.

Even though KOMG has enjoyed a 12.5% rally off the September 23 low, the overall formation of the A-B-C corrective rally is bearish.  It's a Bear Flag, charactized by "higher highs and higher lows."

As of yesterday's close, KOMG is back below the neckline of the H&S top.  If it can close back above the neckline, I'd rate it as neutral.  If it breaks below the bottom of the Bear Flag, it likely will at least go back to the September 23 low, or close to it.

Quote
Anyhow after several requests (one) please welcome Lulu back - she really is cute!

Welcome, Lulu!   :D

Quote from: Melf Elf on October 05, 2005, 05:18:16 AM
If it breaks below the bottom of the Bear Flag, it likely will at least go back to the September 23 low, or close to it.

KOMG broke below the bottom of the Bear Flag on Wednesday. Yesterday, it returned to within two cents (29.19) of the September 23 low (29.17).

Yesterday's bounce off 29.19 could produce more upside today off the double bottom (29.17 and 29.19),  but this chart action lately isn't bullish.  Holding yesterday's low would be a start.

I like this stock due to Mike's nice work on the fundamentals, but I haven't liked the chart action.

Joining you at 29.64...looks good.

Quote from: robt on October 07, 2005, 11:30:49 AM
Joining you at 29.64...looks good.

robt,

I wanted to short KOMG on a rally and re-test of the bottom of the broken Bear Flag, but I didn't get the chance of a fill.  KOMG had a weak rally on Monday, then yesterday, broke below 29.17-29-19 support, closing at 28.96, which I view as Bearish Move #4 in this stock.

Bearish Move #1: Broke the H&S top.

Bearish Move #2: A-B-C Corrective Rally (Bear Flag rally) that ended at the broken neckline of the H&S top.

Bearish Move #3: Broke below the Bear Flag.

Bearish Move #4: Broke below the base of the Bear Flag (29.17) and broke the Double Bottom at the base of the Bear Flag (29.17-29.19).

SAN JOSE, Calif., Oct 12, 2005 /PRNewswire-FirstCall via COMTEX/ -- Komag, Incorporated (KOMG), a leading independent supplier of thin-film media for disk drives, is increasing its business outlook for the third quarter of 2005 ended October 2, 2005.

As a result of continuing strong industry and customer demand during the third quarter of 2005, the Company expects total revenue to approximate $180 million and finished disk shipments to approximate 27.5 million. Total revenue in the prior quarter was $172.4 million.

http://biz.yahoo.com/prnews/051012/sfw099.html?.v=20

Gaining in AH, but who knows what this market will do tomorrow?

Quote from: robt on October 12, 2005, 04:13:41 PM
Gaining in AH, but who knows what this market will do tomorrow?

Glad to hear it, given how ugly the market has been. 

KOMG came within $0.34 of the Bear Flag Target #2 yesterday.  It was at 29.21 in AH, which puts it right back at the 29.17 - 29.19 broken support, which now is an area of resistance.  Even an opening there, though, could spawn a badly needed relief rally in the general market.

Anything more than that would be a BIG relief.   ;D

I am in this morning as well. This should fill the gap at $38 given the strong fudamentals & great analysts reports.

Quote from: Melf Elf on October 12, 2005, 04:19:57 AM
Bearish Move #1: Broke the H&S top.

Bearish Move #2: A-B-C Corrective Rally (Bear Flag rally) that ended at the broken neckline of the H&S top.

Bearish Move #3: Broke below the Bear Flag.

Bearish Move #4: Broke below the base of the Bear Flag (29.17) and broke the Double Bottom at the base of the Bear Flag (29.17-29.19).

Bearish Move #5: Gapped up to 29.17-29.19 resistance area on good earnings, and rallied.  Closed yesterday at 28.86, below the "good earnings" gap. 

Bearish Move #6: Rallied to the down trendline off the high on October 17.  October 18, KOMG opened below the down trendline, rallied above it by by six cents, then closed down on a Bearish Engulfing Pattern.  Yesterday's third tag of the down trendline validates it as resistance.

As we've discussed over the last couple of months, often you will see a chart like KOMG inexplicably breaking down on what appear to be very good fundamentals, then later on you get some news to explain it.

"First the chart...then the news."

Earnings were good last week, but KOMG closed yesterday below "the good earnings gap,"  suggesting that the earnings news wasn't perceived as "good enough" for that gap level to be maintained.

The market is much more about "perception of the news," than it is about the news itself.

The chart has been bearish, and now weeks later, KOMG not only couldn't hold "the good earnings gap" yesterday, this morning, KOMG receives a downgrade from outperform all the way to underperform. 

The downgrade should get KOMG to Bear Flag Target #2: 27.16. 

Updated: 06:54 AM EDT
RESEARCH ALERT-Bear Stearns cuts Komag to "underperform"

Oct 19 (Reuters) -

KOMAG INC.

Current Prior

Rating Underperform Outperform

--Bear Stearns cited concerns about weakening industry conditions, capacity additions, and easing media supply constraints for the downgrade.

(Reporting by Preeti Mishra in Bangalore)
10/19/05 06:52 ET

That was not earnings, it was revised guidance -- revised upwards; how can "up" be not good enough?

Earnings will come Nov. 2.

(had some more verbiage here earlier but that was about a different beleaguered stock)

Quote from: robt on October 19, 2005, 02:29:28 PM
That was not earnings, it was revised guidance -- revised upwards;

Sorry, I should I have been more clear that it was news related to earnings/guidance, etc.

Quotehow can "up" be not good enough?

Go figger, huh?   ???

Your question is at the heart of our discussions we've had for the past two months in this folder and in the STX and CKCM folders about the "counter-intuitive" factor that sometimes exists in the market.  Things that "don't make sense" on the face of it.

The fundamentals on these stocks have seemed great, but the charts looked lousy, and they  have continued down. 

KOMG gave revised guidance that was "up," as you say, on the heels of Four Bear Moves in the chart.  At least two downside targets still were IN PLAY.

That doesn't mean that the targets had to be made, but the stock still was in bearish mode.  What happened after the upward guidance was given?  All that did for the stock was to send it up for a third tag of the down trendline, then we got today's tank on a severe downgrade from outperform to underperform, skipping the step to a neutral rating altogether.

Why the big downgrade when KOMG has upped guidance, I don't know, but the chart has been bearish and it made another downside target (and more) at the open.

While today's slam to the downside doesn't make sense from the standpoint of what we know about the fundamentals, it definitely makes sense from a technical point of view: there were at least six identifiable Bear Moves in KOMG as of yesterday's close  prior to the gap down.

There's no arguing with the chart, of course, but I think what's going on has little to do with earnings. I think the perception is that the time for "no moving parts" has come to data storage, and this idea may overrule any kind of earnings figures, even though we all know it will be a long time before flash is ready to take dominance in the market.

I thought it might be an idea to buy Sandisk as a hedge, but discovered that it was also the subject of another downgrade today...maybe when it finds a bottom. Also earnings are coming up tomorrow -- after my experience with AMD, a possible "sell on the news" reaction puts me off.

Anybody here who likes Jazz? Well since 4.27PM ET I have been singing "what a wonderful world" and even though I am not as good as Armstrong but I sing it with the same conviction. (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=3069)

KOMG beats analysts' expectations. In fact earnings increased 300% compared to same quarter last year and the share is down 5.5% for the day and the PE is around 10. What a wonderful world and what a wonderful opportunity to build wealth.

Let me quote from the earnings release:

QuoteKomg earned $32.0 million, or 97 cents a share, in the quarter, compared with $9.3 million, or 31 cents a share, a year ago. Sales jumped 76% from last year to $180 million. Analysts surveyed by Thomson First Call were forecasting earnings of 94 cents a share on sales of $179.5 million.

T.H. Tan, Komag's Chief Executive Officer stated, "Overall demand for our products continued to be strong during the third quarter of 2005. A favorable product mix shift to higher sales of advanced 3.5-inch disks at 100GB and greater, combined with an increase in sales of aluminum substrates led to a record level revenue of $180.0 million and a 17.8% net margin.

"Overall demand continues to be very strong entering the traditionally seasonally strong fourth quarter. As in the third quarter of 2005, our factories continue to run at full existing manufacturing capacity of approximately 27 million disks per quarter. Our capacity expansions are currently progressing on schedule. We expect to have a limited amount of incremental capacity from our first expansion in the later part of the fourth quarter of 2005. With some incremental capacity, as well as continuing favorable product mix shift to higher capacity 3.5-inch disks, we expect total revenue in the fourth quarter of 2005 to increase 2% to 4% from the third quarter of 2005. Net margin in the fourth quarter is currently expected to be similar to the third quarter at approximately 17% to 18%.
We expect to complete the capacity expansion discussed above during the first quarter of 2006 and exit the first quarter of 2006 with total capacity of approximately 31 million disks per quarter. Additionally, we have started a further capacity expansion at our existing manufacturing sites in Malaysia, in an attempt to keep up with the growing demand for media. This additional capacity is planned to be available beginning in the second half of 2006 with total capacity of approximately 40 million disks per quarter by the end of 2006.

Hmmm - I am in a buying mood........

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=3313;image)

Thank you Melf Elf.  You have constantly shown how your charts can be prescient.  I agree with you about the market being perception.  Thanks for the fundamentals on KOMG, Michael.

I think the market perceives KOMG (and STX) as yesterday's technology.  It is set on seeing flash replace disk drives. For this reason, good earnings was not enough.   

I don't have much technical or fundamental skills.  What I beleve is my strengh is my ability to spot trends and the new "hot" things.   My preception is that disk drives will become more integral to our everyday life.  Plam has a PDA call the Lifedrive.  This is a great name and encompasses the future of disk drives.  Disk drives will become as essential as a watch or a wallet

Moreoever, at home DVR's will replace VHS players.  DVR's have been soundly beating recordable DVD's as the preferred technology.  Also, as media center gain traction, bigger disk drives will be call for.  Corporations will also need bigger drives as they create larger databases.  (The company I work for is just now transfering their files to a database.)  This trend is most obvious in the recent spectacular successes of data management companies. 

I will look to enter STX or KOMG.  (what about WDC?, it is getting alot of exposure from IBD.)

Good luck.

Quote from: logocovet on October 26, 2005, 10:17:47 PM
You have constantly shown how your charts can be prescient.  I agree with you about the market being perception. 

Thanks, logocovet.  What I try to do is look at a chart as objectively as possible, and follow what I think it's telling me.  I don't always get it right, believe me!  But, KOMG has been telling me that it's acting bearish...

Quote
Bearish Move #1: Broke the H&S top.

Bearish Move #2: A-B-C Corrective Rally (Bear Flag rally) that ended at the broken neckline of the H&S top.

Bearish Move #3: Broke below the Bear Flag.

Bearish Move #4: Broke below the base of the Bear Flag (29.17) and broke the Double Bottom at the base of the Bear Flag (29.17-29.19).


Bearish Move #5: Gapped up to 29.17-29.19 resistance area on good earnings, and rallied.  Closed yesterday at 28.86, below the "good earnings" gap. 

Bearish Move #6: Rallied to the down trendline off the high on October 17.  October 18, KOMG opened below the down trendline, rallied above it by by six cents, then closed down on a Bearish Engulfing Pattern.  Yesterday's third tag of the down trendline validates it as resistance.

...and, it continues to tell me that it's acting bearish:

Bearish Move #7: Gap down on October 19 to Bear Flag Target #2 (27.16) and beyond (low was 25.48)

Bearish Move #8: From the 25.48 low, KOMG had a gap-filling rally back to former support at 29.17-29.19, and back to the down trendline off the off the August high.  The October 25 high was 29.18. October 26, KOMG failed at the down trendline, putting in Hit #4, and validating that BOTH:
a. former 29.17-29.19 support is now resistance
b. the down trendline off the August high continues to be resistance.

QuoteWhat I beleve is my strengh is my ability to spot trends and the new "hot" things.

Good, because I still think that 8-track tapes are the hottest thing, which shows you how good I am at spotting trends and the new "hot" things!

QuoteMy preception is that disk drives will become more integral to our everyday life.  Plam has a PDA call the Lifedrive.  This is a great name and encompasses the future of disk drives.  Disk drives will become as essential as a watch or a wallet

Do you mean Palm?  I don't know what PDA is, so you see what I mean.  I'm not up on this stuff at all, and I'm glad that you, Mike and others understand it.

Quote
Moreoever, at home DVR's will replace VHS players.  DVR's have been soundly beating recordable DVD's as the preferred technology.

Don't laugh at me, but I've never heard of DVR.  I've heard of DVD though. 

Nah-h-h-h.... go ahead and laugh at me.   :D

QuoteAlso, as media center gain traction, bigger disk drives will be call for.  Corporations will also need bigger drives as they create larger databases.  (The company I work for is just now transfering their files to a database.)  This trend is most obvious in the recent spectacular successes of data management companies. 

I will look to enter STX or KOMG.  (what about WDC?, it is getting alot of exposure from IBD.)

So, based on the trends that you  see, do you still think STX, KOMG, WDC, MXO, etc. are stocks to own, or stocks like SNDK, Plam (Palm?)...?

I'm seriously weak at understanding trends, technology, fundamentals, etc.  I don't have a microwave oven or a cell phone or an answering machine...my car is 15 years old....you get the picture, and it's not pretty.

;D

"Updated: 04:11 PM EDT - October 26, 2005
Komag Reports Record Revenue for the Third Quarter of 2005, Net Income Exceeds the Prior Quarter"

We've discussed quite a bit on this thread about the "counterintuitive" nature of KOMG, which looks to be fine, fundamentally, but has a chart that looks ugly.

The company reported Record Revenues last night, and a quick read of the earnings report...it looks fine. 

Market response:

Bearish Move #9: On Record Revenues, and what appears to be a real decent earnings report (quick skim), KOMG has taken out the recent low of 25.48, and was down over $2.00 in early trading.

KOMG currently is BID 25.02...ASK 25.03, down $1.98.

Quote from: Melf Elf on October 27, 2005, 11:17:53 AM
Market response:

Bearish Move #9: On Record Revenues, and what appears to be a real decent earnings report (quick skim), KOMG has taken out the recent low of 25.48, and was down over $2.00 in early trading.

KOMG currently is BID 25.02...ASK 25.03, down $1.98.

After all of those Bear Moves, it looks like the bleeding in KOMG finally has stopped, even if it's only temporary.

Like INTC, which Calven and I just discussed in that folder, KOMG has broken above its twice-validated down trendline off the August highs.  Breaks above this type of down trendline can result in the stock re-testing, then bouncing higher off the down trendline, or result in "walking down the trendline" (see red arrows) and making a double bottom at/near the October 28 low of 24.49. 

The stock, at least, has stopped acting bearish and the break above the down trendline is a start for a "possible" trend change.

Bull Move #1: KOMG broke above the July down trendline (that could get negated, but it's a start).

The October 28 low of 24.49 "could be" the low, and that will become clearer as the chart unfolds. 

If you look at the late September/early October lows (29.17-29.19), that broken support became resistance at the October 25 high of 29.18, confirming the bearish trend in KOMG:

"In a bearish trend, former support should act as resistance."  It did.

29.17-29.19, then, is key resistance, near-term.  A close above that would be a "higher high" as well as a close above former resistance.





 

Hi Melf Elf! (always meant to ask you, what does melf mean?)

Thanks for your charts.  I'lll try to answer your questions?  I'm glad I can actually provide some info to you.  I don't know how to quote so I'll just write my responses.

A PDA is a personal digital assistant.  People used to carry these around to keep mostly addresses, appointments, and later on Word, Excel, etc on them.  Now they are mostly integrated into higher end cellphones. 

Palm's Lifedrive is a novel concept and one that I think will stick.  It's just as iits name implies, a disk drive for one's everyday life.  You can keep your songs, files, videos, whatever, on it.  It is also as a scaled down laptop with wich you can surf the web, write email, follow the market, do work, etc..  I think it is one of the best new gagets out (although currently pricey).  This gaget is also the future of laptops.   

How is this relevant to STX or KOMG?  Well, the heart of the Lifedrive is a disk drive.  As such gagets become more and more popular, the demand for more drives will increase.  Moreoever, we are talking about rather large disk drives (20 -40 gig), so the current Flash technology will not suffice.

A DVR is a digital video recorder.  Tivo is probably the best known company that markets these.  Currently, most cable companies are also selling them to their customers.  With a DVR, one can watch any show one wants at any time one wants.  (it's like copying a tiv show onto a vcr and watching it later but much easier)  DVR far surpass DVD recorders in ease of use and has become the new VCR (video cassette recorder).  This is the largest potential market for disk drives.  DVR's also require huge storage capacity and thus flash will not suffice. 

We are becoming an increasing digial society.  Just recently, Mark Cuban (owner of the Dallas Mavericks and once tech geek) has started a project to trasform movies from a film platform to a digital one.  This is inevitably where the film indsutry will go (how cubersome is to to ship film reels all across the world when you can send a digital file over the net?)  This will require a huge amount of disk drive storage space. 

So I think this means good things for companies like STX, KOMG, and WDC. (I don't know so much about Palm as it has alot of competition.)  This is not to shortchange flash drive makers.  Flash has all the makings of a rule breaker technology although it does currently have limits.

What kind of 15 year old car Melf Elf?  I drive a 73 Beetle (it is older than I am).  I love old cars. 

I'm waiting for STX or KOMG to start an uptrend to take a position.  Plus there is just so many good stocks to invest in, it's hard to say which is better.  I noticed that you are a very short term trader Melf Elf, does it make tax time hell?   :) 

logocovet,

Thanks and applause for all of that information.  You really know your stuff!  I feel like I just crawled out from under a rock.   :D

I don't know what Melf means because I made it up for children, at Christmas time.  I picked it because children like things that rhyme.  I found out later that I wasn't original with it, though.  There were lots of "Melf Elfs" on Google.

Yes, tax time is HORRIBLE.  I write down all of the trades as they are completed, but I'm way behind typing them onto a spreadsheet to give to my accountant.

Quote from: Melf Elf on November 04, 2005, 07:42:38 AM
[Bull Move #1: KOMG broke above the July down trendline (that could get negated, but it's a start).

29.17-29.19, then, is key resistance, near-term.  A close above that would be a "higher high" as well as a close above former resistance.

Bought KOMG at 29.25 on the breakout above 29.17-29.29 (EDIT: 29.19, not 29.29), which has been key resistance.  Stop is a close or obvious late day tank below 27.01, the low prior to the breakout.  Risk: a loss of 7.7%

I hope this thread is not dead because KOMG is another STOCK ON FIRE, especially right now!

KOMG has been reversing quite nicely for the past few days and now makes a good entry point. I added KOMG positions today at market open at $30.50 per share. KOMG broke through a few resistance levels already and the next target to break through is around $32.65. RSI has recovered to 60's on and MACD is prone to crossover into positve territory on the 6-month chart. This may be the beginning of a bull run towards $40!

Quote from: [D] Investor on November 18, 2005, 10:25:58 AM
I hope this thread is not dead because KOMG is another STOCK ON FIRE, especially right now!

DInvestor,

I'm in with you.  Posted on the breakout yesterday.  It's just above your post.

Quote
KOMG has been reversing quite nicely for the past few days and now makes a good entry point. I added KOMG positions today at market open at $30.50 per share. KOMG broke through a few resistance levels already and the next target to break through is around $32.65.

On the Triangle Pattern breakout (green lines on the chart below), I get a target of 33.60 IN PLAY.  That would get us up to the broken neckline of the summer H&S top.

We have to watch that this Triangle pattern doesn't "morph" (change) into a Bear Flag (the rising red line connecting the recent tops).  That line comes in today at about 31.22.  Today's high is 31.03.

Quote
RSI has recovered to 60's on and MACD is prone to crossover into positve territory on the 6-month chart. This may be the beginning of a bull run towards $40!

Thanks for your analysis.  Applause.

EDIT: The chart wouldn't print.  Scroll down to the next post for the chart.

Sorry, DInvestor, but for some reason, that chart didn't seem to post.  I'm trying again.

KOMG presentation:
http://www.komag.com/investors/presentations/KOMG3Q05_Nov05.pdf

I have started with a small KOMG position  ;)

OLIVER

Quote from: la-onda on November 18, 2005, 12:30:28 PM

I have started with a small KOMG position  ;)

OLIVER

Hey, Oliver!

At the moment, I've got some concerns about the Bear Flag that I posted about to DInvestor, and the Bear Flag fractal on the intraday. 

Fractal means a repeating pattern.

Basis the daily chart that I posted above, the Bear Flag is the recent "higher highs...higher lows."

Basis this intraday chart, that pattern is repeating (connect the" higher highs...higher lows."

Technically, KOMG has been very bearish until the recent breakouts above the down trendline, and yesterday's breakout above key 29.17-29.19 resistance (remember the NINE Bear Moves?)

A few things that I don't like:

1. Volume on yesterday's breakout was "just okay."

2. Volume today is weak.

3. The early rally to a new high, at 31.03, then the air was let out of it.  We're now down $0.15, at BID 30.23...ASK 30.25.

4. The Bear Flag fractals.

Because of those factors, I will hold it if we break below the Bear Flag on the intraday chart, but I will sell if we break below the low of the Bear Flag on a PRINT basis, which is the 30.01 low at 2:10PM yesterday afternoon.

I'll have a little profit, and will wait to see what develops, and see if I want to re-enter.

http://charts-d.quote.com:443/987073757410?User=demo&Pswd=demo&DataType=GIF&Symbol=NASDAQ:KOMG&Interval=10&Ht=400&Wd=600&Display=2&Study=MACD&Param1=12&Param2=26&Param3=9&FontSize=9

I have been a bit absent recently but I can see that KOMAG has renewed interest.

It is my feeling that the latest increase mainly has been fueled by short covering, which is really sad having in mind the absolute stellar fundamentals of the company. So here we go:

The short interest increased with more than 50% in October:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=9761;image)

From what I am reading on different sites the short case is centered around the death of the HDD as a result of flash disks taking over (an idea that gained popularity when Apple introduced and Ipod model with flash disk)

As always these rare moments when the market reacts to a popular belief absolutely out of touch with the real world there are money to be made.

The HDD is not going to die. To the contrary from being a product that was only used in the PC industry HDD is entering many new high growth areas:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=9756;image)

In fact it seems like KOMG biggest problem is to keep up with demand. They have been running at full capacity for 2 quarters (4Q 05 being the third):

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=9755;image)


It is evident that the HDD market continues to face strong demand:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=9760;image)

but for Komag the situation seems even rosier. The continued demand for higher capacity means that the HDD producer cramps more dishes into the same drive:


(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=9757;image)

The result is that the media market (disks) outpaces the HDD market.

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=9758;image)

The good news is that KOMG is increasing their production capacity in Q1 06. Komag today have to select which orders they can fulfill in Q1 they can start to take in new orders. We had the same situation in Q2 04 and it took 4 quarters to have full capacity utilization again.

KOMG's track record is really amazing. Sales has grown with 80% in one year and EPS has grown with more than 300%:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=9759;image)

The result is a balance sheet loaded with cash (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=3313;image)

Even when the growth is limited by capacity constrains they have managed to grow the earnings. The increased capacity from Q1 will add additional momentum to the growth. I can only wonder who could even dream about shorting this stock. The PE today is around 10 with the outlook it should trade at a PE of around 30 or a PPS of 90.

I am going to hold for a 300% increase unless the fundamentals change which seems very unlikely (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=3073)
 
Could we be looking at an inverse head and shoulder formation?

KOMG is now a hot stock.

Quote from: Melf Elf on November 17, 2005, 10:13:10 AM
Bought KOMG at 29.25 on the breakout above 29.17-29.29 (EDIT: 29.19, not 29.29), which has been key resistance.  Stop is a close or obvious late day tank below 27.01, the low prior to the breakout.  Risk: a loss of 7.7%

Sold at 33.60, the Ascending Triangle target, which also is the neckline from the H&S top. 

Gain: 14.9%.

KOMG: Short Interest UP 20.8% to 9.7M in Nov 2005
Friday , November 25, 2005 13:18 ET

According to new short interest data from NASDAQ, short interest for Komag Inc (NasdaqNM: KOMG) INCREASED 20.8% to 9,728,017 shares for the month ended mid-November, 2005.

SYMBOL      OCTOBER        NOVEMBER       CHANGE       %CHANGE  DAYS/COVER
--------   -------------   -------------   -------------  ------------  ----------
KOMG           8,054,158       9,728,017      +1,673,859       +20.78%           8

Based on KOMG's 20-day average daily share volume of 1,328,595, it would require approximately 8 day(s) of buying to cover this short interest.
very low volume on friday!

updated chart:

Bought KOMG back a week following the announcement of Cisco's acquisition of Scientific-Atlanta. I believe Cisco will make SA set-top-box TIVO like and hence drive up the disk demand for storing video. People will throw away the VCRs pretty soon. :-)

Kudo to Mikael for this outstanding pick!

Quote from: la-onda on November 26, 2005, 06:15:38 AM
Based on KOMG's 20-day average daily share volume of 1,328,595, it would require approximately 8 day(s) of buying to cover this short interest.

Oliver,

Thanks for your updates this weekend.  Applause.  Interesting information on the short interest. 

During the 40% correction in KOMG from August to October, the fundamentals and the short interest were trumped by the chart/technicals, which looked awful. 

Quote from: Melf Elf on November 04, 2005, 07:42:38 AM
Bearish Move #9: On Record Revenues, and what appears to be a real decent earnings report (quick skim), KOMG has taken out the recent low of 25.48, and was down over $2.00 in early trading.

KOMG currently is BID 25.02...ASK 25.03, down $1.98.

"In a bearish trend, the bears are right to short." 

What we've got now in KOMG, however, is at least 3 Bull Moves:

#1. Broke above the August down trendline.

#2. Broke out above the November Ascending Triangle.

#3. Ascending Triangle Target of 33.60 MADE.

Quote from: Melf Elf on November 22, 2005, 03:31:09 PM
Sold at 33.60, the Ascending Triangle target, which also is the neckline from the H&S top. 

Gain: 14.9%.

Short-term, KOMG has some resistance here.  I'd like to re-enter on a pullback, if I can.  With the chart now acting bullish and with decent underlying fundamentals, that kind of increase in short interest that you posted could help to boost the stock. 

I would suspect that the rally from the Ascending Triangle breakout to the target of 33.60 was fueled, at least in part, by some short-covering.  That rally was from November 17-22.  The short interest that you posted was as of November 15, I believe (that used to be the report date; don't know if it still is).  Even so, that still would leave some "days to cover" remaining, I would think.

Quote

KOMG on the move today.  I guesss it's on a few newsletters buy list.  The one I get recommended it as a buy above 33.75 with 39 as 1st target and 47 as 2nd target.  Listed it as high risk though!  Bought some options on it today.
Brigitte

good luck Brigitte;

updated short list link (more detailed):
http://www.shortsqueeze.com/index.php?PHPSESSID=97600785f06345a569dd309f95897980&symbol=komg

Komag to Participate in Upcoming Investor Conference

Wednesday, November 30, 2005 16:00 ET

SAN JOSE, Calif., Nov 30, 2005 /PRNewswire-FirstCall via COMTEX/ -- Komag, Incorporated (Nasdaq: KOMG), a leading independent supplier of thin-film media for disk drives, today announced that the Company will participate in the following investor conference:

(Logo:  http://www.newscom.com/cgi-bin/prnh/19990816/KOMGLOGO )

     Event:     Lehman Brothers 2005 Global Technology Conference
     Date:      Thursday, December 8, 2005
     Time:      4:00 p.m. PST (7:00 p.m. EST)
     Location:  San Francisco, California

Live and archived webcast of the presentation will be available under Webcasts and Events in the Investors Section of Komag's website at http://www.komag.com .


8)

 >:D
KOMG: Bear Stearns Ups to Peer Perform from Underperform; Analyst Notes
Friday , December 02, 2005 07:43 ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  Bear Stearns Cos.
Ratings Action: UPGRADE
Current Rating: Peer Perform (from Underperform)
Analyst Comments: The firm upgraded the stock based on stronger PC demand, low channel inventories, benign pricing, and tight supply.

http://www.knobias.com/individual/public/news.htm?eid=3.1.8bbd2beba8f7b5ca8cad0dacc1a31aa099daafac20e56fced712abde0828a246

 ;)
Western Digital Amends Volume Purchase Pact With Komag


DOW JONES NEWSWIRES
December 2, 2005 7:04 p.m.

WASHINGTON -- Western Digital Corp. (WDC) amended its volume purchase agreement with Komag Inc. (KOMG), the data storage device company said in a Securities and Exchange Commission filing Friday.
Under the amended agreement, Komag will increase the number of components it supplies to Western Digital. Western Digital didn't disclose the number of components Komag will supply it with under the amended agreement.
Komag supplies thin-film disks, the primary high-capacity storage medium for digital data, for disk drives.
The agreement is good news for Komag. In late October, as reported by Dow Jones, Komag's shares fell 10% in trading after Bear Stearns downgraded the hard disk-drive sector, saying there are concerns about weakening industry conditions.
Western Digital said the amended agreement is part of an ongoing effort to "diligently" work with strategic suppliers to ensure adequate supply of key components for its hard drives.

http://biz.yahoo.com/e/051202/wdc8-k.html

Hi Oliver,

Thanks for keeping us all updated. Komag is really a great story. Try to read the Bear Stearns upgrade again:

QuoteThe firm upgraded the stock based on stronger PC demand, low channel inventories, benign pricing, and tight supply.

Based on this they give them a neutral rating. Hmmmm.... forward PE is around 10. With strong demand, tight supply, low inventories, increased production capacity and the latest amendment of their contract with Western Digital I think it should trade at a PE of 30.

This stock is driven by the fundamentals and they are stellar. Here is what IDC has to say about storage demand:

QuoteSAN FRANCISCO (Reuters) - The market for computer disk storage systems grew a record 12.5 percent in the third quarter amid surging demand by businesses to secure a growing mountain of data, market researcher IDC reported.

Demand for computer storage has been gaining as companies are forced to back up vast amounts of e-mails, documents and other data to comply with new regulations such as the U.S. Sarbanes-Oxley Act aimed at improving corporate accountability. Businesses also are investing in storage to protect data from disasters such as hurricanes and earthquakes.

Total third-quarter disk storage grew 58 percent to 505 petabytes, IDC said. A petabyte is equal to 1 million gigabytes, which in turn is about the same as 25,000 notebook computers each holding 40 gigabytes.

And we are sitting on the company that has the key to meet this surge in demand.

Below is the weekly chart for KOMG. As it can be seen the blip in the chart caused by Bear Sterns downgrade is just noise. Komag will continue the uptrend started last year now when it is increasingly clear that the future for the HDD industry is brighter than ever.

We have record short interest in KOMG many of those short positions were initiated by Bear Sterns Downgrade so I guess that the latest BS upgrade should shake the short community a bit especially now when they are deep under water.

update:
KOMG: Baird Starts @ Neutral; Sets Tgt @ $40; Analyst Notes

Thursday , December 08, 2005 07:51 ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  Robert W. Baird & Co.
Ratings Action: INITIATE
Current Rating: Neutral
Target Price Action: INITIATE
Target Price: $40.00
Analyst Comments: The firm would wait for a more attractive entry point to buy shares heading into the seasonally weaker period of the year.
This rating information was reported by TheFlyOnTheWall.

http://www.knobias.com/individual/public/news.htm?eid=3.1.f8921c11444cd0aed3030271b58e9c583b6d0dfc4660f829ed15caec65f778d4

Hi Oliver,

A few interesting news points in the 8K filled on Wednesday

QuoteThe first new production equipment is fully installed, qualified and producing disks. The remaining equipment for this capacity expansion is expected to be delivered by the end of the fourth quarter of 2005 and qualified for production during the first quarter of 2006, resulting in total media capacity of 31 million disks per quarter. Based on the current equipment installation and qualification schedule, there could be some modest upside to the Company's manufacturing capacity in the fourth quarter of 2005, which may have the potential for some revenue improvement as compared to the prior guidance for the fourth quarter of 2005, if demand remains strong through the end of December 2005.

Great to see that they might profit from the capacity increase already in this quarter. The capacity will be increased with 15% from next quarter. I would assume that the bottom line effect would be higher as overhead would fall as a percentage of revenue.

QuoteThe Company's second capacity expansion, targeted primarily for second half of 2006, is also on schedule to meet commitments to customers and to exit the fourth quarter of 2006 with total expected capacity of approximately 40 million disks per quarter. In addition, the Company recently entered into an incremental strategic expansion with an existing customer for a further modest capacity increase scheduled for early 2007.

That is a 48% increase in capacity and according to the latest CC this capacity increase is part of strategic supply agreements signed with several companies whereas the companies not only have made commitment to buy certain levels of media but also made prepayments to finance the capacity expansion. (hmmmm... talking about a strong market position!!!!)

The consensus EPS estimate for 2006 is 3.64, which seems very low even taking into consideration that KOMG will have to start paying tax during next year (but the analysts has consistently underestimated Komag's earning power).

Mike

Michael,

An excellent pick here. I am up more than 20% on this one, thanks to you!

It looks like people are assigning a low PE for KOMG (PE=10?). Maybe institutions are accumulating and shorts are slowly covering. I am thinking about adding more.


-Louis

conspirancy  ::) yesterday BNT; today KOMG:

KOMG: Matrix Cuts to Hold from Buy
Tuesday , December 13, 2005 08:49 ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  Matrix
Ratings Action: DOWNGRADE
Current Rating: Hold (from Buy)

http://www.knobias.com/individual/public/news.htm?eid=3.1.cc72bb506758e7e9cf37cb50dbe46989a5087b0395e35c94a644a0f802e0a7cb

I will keep on holding  >:D
Why?
check this one:
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1605313763&tid=komg&sid=1605313763&mid=3698

cheers
Oliver

KOMG: JP Morgan Starts @ Neutral; Analyst Notes

Tuesday , December 20, 2005 08:45 ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  JP Morgan
Ratings Action: INITIATE
Current Rating: Neutral
Analyst Comments: The firm believes the positive news on the stock has already priced in shares. They also feel the recent operating upside could have headwinds in 2006.


http://www.knobias.com/individual/public/news.htm?eid=3.1.9753eb3adb72d95f7df3d88499a44ee1e4a524bc0c37d9fdb7e016c9607555f3

awesome

comments are appreciated  ???

Komag Slumps; Analyst Sees Difficult '06
Wednesday December 21, 9:10 am ET 
Komag Shares Slump in Premarket Trading As Analyst Sees Difficulty Beating 2006 Estimates

NEW YORK (AP) -- Shares of Komag Inc. slumped in premarket trading Wednesday after an analyst said there is little room for the company to continue to beat Wall Street expectations.
"In our view, the stocks meteoric rise this past year has left little room for any level of disappointment, and to this point, we believe Komag's recent trend of delivering operating upside could encounter some headwinds moving through 2006," wrote JPMorgan analyst Mark Moskowitz in an investor note initiating coverage of the stock at "Neutral."

The analyst said he expects the San Jose, Calif. maker of disks that are incorporated into computer disk drives "to maintain industry-leading margins over time" but said "seasonal patterns and longer-term risks of excess capacity could limit the stock's outperformance potential.

Moskowitz thinks Komag will continue to benefit from the economics of disk media manufacturing -- prices of hard disk drives have fallen on average 15 percent per year, while disk media prices have only dropped in the low to mid single-digits in recent years, according to Moskowitz -- still, he argued that all the upside is already priced in the stock. Year to date, shares of Komag are up 84.2 percent.

In premarket trading, shares dropped 6.7 percent, or $2.30, from Tuesday's close of $34.60.

Well, KOMG was my stock-picking contest pick for last month and I still follow it, even though I sold shortly before the end of the contest... it was due for a rest after all it's hard work climbing that hill.

With that said, I re-entered today at $32.77.  There is excellent news today of mergers/buyouts with the biggie hard drive makers.  Less price competition can't be bad, and like the press release said, I think there is doubt that things can "really be that good" looking forward with Komag.  So, the negative sentiment is there again.  Plus, a lot of weaker hands have been shaken out, hopefully, with this lull after the run-up.

Plan: If we hit $34 today I'll take quick profits.  If we close below $32, I'll take a loss and look to re-enter sometime later.  Otherwise I'm pretty comfortable holding at this level.  :)

Quote from: la-onda on December 21, 2005, 09:50:22 AM
Shares of Komag Inc. slumped in premarket trading Wednesday after an analyst said there is little room for the company to continue to beat Wall Street expectations.
"In our view, the stocks meteoric rise this past year has left little room for any level of disappointment, and to this point, we believe Komag's recent trend of delivering operating upside could encounter some headwinds moving through 2006," wrote JPMorgan analyst Mark Moskowitz in an investor note initiating coverage of the stock at "Neutral."

Well you asked for comments so here you are:

I will print a copy of this so-called analyst opinion and put it in my yellow file for all times most stupid analyst opinions! He will have the honor of being in the top 10 (after a few analysts who downgraded STX at the bottom getting the whole HDD industry wrong!

First of all the analysts estimates expects a PE of 9 next year. Why in hell do you need to beat that? The stock is already deeply discounted especially having in mind the growth.

But here is the good news we know with almost certainty that they will beat the analysts estimates in this quarter. The estimate is 99 cents compared to 97 cents last quarter. With the strong pricing on media and the capacity increase that will kick in already this quarter it would be a miracle if they don't beat that.

It seems like Mr. Moskowitz is at the opinion that the stock has increased a lot and have to come a bit down. Well I think he is bloody wrong  ;)

I don't know if I should hate or love these self-proclaimed experts. They certainly create a lot of buying opportunities but they can be a bit of an annoyance if you hold the stock!

Mike

SNDK/KOMG: Sandisk May Make Run at Komag; Unconfirmed
Thursday , December 22, 2005 09:59 ET
Hearing, unconfirmed, that Sandisk Corporation (SNDK) could make a run at Komag Inc. (KOMG) based on Seagate Technology (STX) and Maxtor (MXO) deal. SNDK shares are currently trading higher by more than 1%, while shares of KOMG are trading relatively flat.
link: http://www.knobias.com/individual/public/news.htm?eid=3.1.77dd6925ea7d69d75d5ab628c710935a8de7e5f1fcd30a28a0bd0dc3a4749b14

&

KOMG: Komag Inc; WHY?
Totally different manufacturing technology, product, everything. SNDK's business is to steal market share from KOMG type storage media. SNDK makes semi chips of small geometries. KOMG makes 3.5" aluminum based platters where the magnetic media is spurted onto the Al. Its material science, where SNDK is sort of material science but more electrical engineering. Komag, Incorporated designs, manufactures and markets thin-film media, or disks, that are incorporated into disk drives, the primary storage devices for digital data. The Company claims to be the world's largest independent manufacturer of thin-film media. Disk drives incorporating thin-film disks are used wherever large amounts of data are stored, including applications such as the Internet, enterprise databases, communications systems, personal computers and consumer appliances such as peer-to-peer servers, digital video recorders, and game boxes.

link:
http://www.knobias.com/individual/public/news.htm?eid=3.1.8dbdb77cafdc632d3bf06dac7aa68c65dfc92cffdfc5174768f2107b9a284802

from yahoo board:

Flash verses HDD Future
link:
http://www.needhamco.com/Research/Documents/20051012_HAND_vs_Hard_Disk_Drives__-__Hype__Myth_and_Reality.pdf

KOMG: Short Interest DN 12.8% to 8.5M in Dec 2005
Wednesday, December 28, 2005 06:00 ET

According to new short interest data from NASDAQ, short interest for Komag Inc (NasdaqNM: KOMG) DECREASED 12.8% to 8,478,786 shares for the month ended mid-December, 2005.

SYMBOL    NOVEMBER        DECEMBER          CHANGE       %CHANGE      DAYS/COVER
--------   -------------   -------------   -------------  ------------  ----------
KOMG           9,728,017       8,478,786      -1,249,231       -12.84%           8

Based on KOMG's 20-day average daily share volume of 1,138,140, it would require approximately 8 day(s) of buying to cover this short interest.

back to reality in 2006  >:D

KOMG: Smith Barney Starts @ Buy; Sets Tgt @ $43; Analyst Notes
Tuesday , January 03, 2006 08:07 ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  Salomon Smith Barney
Ratings Action: INITIATE
Current Rating: Buy
Target Price Action: INITIATE
Target Price: $43.00
Analyst Comments: The firm is positive on HDD demand, ramping volumes with major customers, and the entry into the high growth notebook market.

cheers
Oliver

on FIRE  >:D >:D >:D

Komag Raises 4Q Revenue Outlook
Tuesday January 10, 6:18 pm ET 
Komag Raises Fourth-Quarter Revenue Outlook; Shares Jump Aftermarket


NEW YORK (AP) -- Komag Inc., a maker of data storage devices, raised its fourth-quarter revenue guidance Tuesday, thanks to strong demand and the company's ability to produce and install products ahead of schedule.
The San Jose, Calif., company said in a filing with the Securities and Exchange Commission it now expects the quarter's revenue to rise by 6 percent to 7 percent from the prior quarter's $180 million, compared with its previous outlook of a 2 percent to 4 percent revenue jump.
Analysts, on average, are expecting revenue of $186.1 million, a 3.4 percent increase from the third quarter, according to a poll by Thomson Financial.
Shares jumped $1.99, or 5 percent, to $41.23 in aftermarket activity, after closing up 34 cents, at $39.24 on the Nasdaq. The stock has traded between $17.20 and $40.50 in the past 52 weeks.
&
Komag, Incorporated (the "Company") previously announced it will be presenting at the following investor conference:

The 8th Annual Needham & Company Growth conference
Thursday, January 12, 2006 at 6:00 a.m. PST (9:00 a.m. EST)
In New York, New York

A live and archived webcast of the presentation will be available under Webcasts and Events in the Investors Section of Komag's website at http://www.komag.com.

At the investment conference, the Company's executives expect to provide updates regarding conditions in the hard disk industry. Specifically, the Company expects to make the following comments:

*The Company currently expects revenue for the fourth quarter of 2005 to be
6% to 7% higher than the prior quarter. The Company's prior guidance for
revenue in the fourth quarter was a 2% to 4% increase over third quarter of
2005 revenue of $180 million.

*The expected increase in the revenue was due to strong demand throughout the
quarter and the Company's ability to install, qualify and produce product on
new equipment ahead of the prior schedule.

*The Company expects net margin for the fourth quarter to approximate 17% to
18%, consistent with prior guidance.

*With all of the equipment for the first capacity expansion now
installed, the Company expects available media production capacity for the
first quarter of 2006 to approximate 31 million disks.

*Current customer demand for Komag disks appears strong, which together with
the increased capacity could lead to increased revenue in the first quarter
of 2006, over the fourth quarter of 2005.

new updated 31 slides presentation:
http://www.komag.com/investors/presentations/KOMG3Q05_Jan06.pdf

please check slide 20 !!!

;D

here we go!

two upgrades today  ;D

Komag    KOMG    Needham & Co    Strong Buy    $44 » $48
&
Komag    KOMG    Piper Jaffray    Outperform    $40 » $50

http://www.briefing.com/Investor/Public/MarketAnalysis/Calendars/UpgradesDowngrades.htm

3rd upgrade

KOMG: Craig-Hallum Ups to Accumulate from Neutral; Sets Tgt @ $48; Analyst Notes
Wednesday, January 11, 2006 10:48 ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  Craig-Hallum Capital Group LLC
Ratings Action: UPGRADE
Current Rating: Accumulate (from Neutral)
Target Price: $48.00
Analyst Comments: The firm is upgrading KOMG based on positive Q4 revenue guidance.

Hi Oliver

Indeed lots of good news around Komag these days. As said before you didn't have to use more than a couple of minutes to study HDD market and Komag's releases to know that this upgrade was in the making.

Now we are just missing JP Morgan officially apologize for the disastrous rating on December 21. I just can't imagine that the so-called analyst Mark Moskowitz actually believed that Komag might miss the estimates for this quarter!

I previously put a $90 target on Komag so there is still a long way to go. I really can't understand why a stock that has grown earnings with 300% and continue to guide upwards should trade at a forward PE below 12!

Mike

Great call on KOMG Michael.

I got in on your rec.  I wish I got in on STX too.  Suddenly all the analysts and press are jumping on how good STX is.  Is it too late to get into Seagate?

Thanks.

Hi Michael

Thanks again for getting us into KOMG. I have a target price of $4 EPS x 15 PE = $60. How did you arrive at $90?


-Louis

Hi Louis,

I think your EPS forecast is pretty realistic. They will add a lot of capacity next year as you know but on the other side they will start to pay taxes.

It really comes down to the fair PE. KOMG is a great story with phenomenal top and bottom line growth. Their market position is extremely strong (they can't produce enough media to meet demand!). Should they trade at a PE of 15?

Maybe you are right but try to look at the industry. The average PE is around 20 with an average revenue growth of 19%. Komag's revenue growth (ttm) is 76%.

My target equals a PE of 22. Is that too much?

At this point in time it is probably an academic discussion. I think most 3SOF members would be happy with a 50% gain  (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=3073)

Logocovet I will try to answer your STX question in the Seagate thread.

Mike

Needham Presentation:

http://www.komag.com/investors/presentations/Needham_Jan06.pdf

cheers
Oliver

Hmmmm according to Piper Jaffray Komag offers "investors better upside potential at current levels" than Seagate. I am not sure about that but I am sure that both stocks have a significant upside.

Seagate confirmed during their CC that: "Media will be constrained for the rest of 2006 especially for AlMag and they will rely on outside support to meet demand"

So Komag certainly has the wind in the back!

Back in September and October it seems for some that Komag was a great stock to short. After all it has increased 400%:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=13674;image)

Boy were they wrong!

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=13675;image)

Today the share price is on 25% higher than when they started this ill faited short attack and it starts to really hurt. Especially as it seems like KOMG momentum is going to continue. I don't think that any short today expect to make money out of his position so it is only a matter of how to minimise the loss.

30% of all shares has been shorted so it is going to be interested to see how they are going to cover. It is not going to be easy. I am not sure if KOMG need this extra fuel but it never hurts (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=3073)

Mike

Komag's annual result is out and what a magnificent year for Komag! They beat the estimates and EPS grew from $1.71 to 3.55.

The CEO is upbeat about 2006:

QuoteEarly indications for 2006 are that overall demand continues to be very strong and our factories are continuing to run at full manufacturing capacity

IBD has an excellent write up on the HDD industry: http://biz.yahoo.com/ibd/060125/newamer.html?.v=1

Finally the short position for January is out. The covering continue at a very slow pace but there are still 7.96 million shares short. These poor souls has already lost at least 80,000,000.00 USD and with the excellent business conditions for Komag I am afraid that this figure is going to go up signiifcantly.

On another note I added to my Seagate position yesterday. Both these stocks has excellent potentials going forward. I am fully invested in Komag but had a little space for some more STX.

Mike

KOMAG REPORTS RECORD REVENUE, EPS FOR Q4 AND 2005 FISCAL YEAR
Wednesday, January 25, 2006 21:15 ET

Jan 25, 2006 (AsiaPulse via COMTEX) -- (Full text of this release can be found at http://www.asianetnews.net)

SAN JOSE, Calif., Jan. 25 /PRNewswire-AsiaNet/ - Komag, Incorporated (Nasdaq: KOMG), a leading independent supplier of thin-film media for disk drives, today announced record revenue for the fourth quarter and 2005 fiscal year of $192.9 million and $685.9 million, respectively. Diluted earnings per share for the fourth quarter and 2005 fiscal year were also a record level of $1.07 and $3.55, respectively.

For comparison, third quarter 2005 revenue, and diluted earnings per share were $180.0 million, and $0.97, respectively. Revenue, and diluted earnings per share in the fourth quarter of 2004 were $131.2 million and $0.51, respectively.

For the 2004 fiscal year ended January 2, 2005, revenue and diluted earnings per share were $458.4 million and $1.71, respectively.

T.H. Tan, Komag's Chief Executive Officer, stated, "We are very proud of our 2005 record level financial results. Overall demand for our products was very strong during 2005, our revenue increased 50 per cent in 2005 over the prior year primarily due to an increase in finished disk shipments. Net income was $115.6 million, a 125 per cent increase over the prior year and diluted earnings per share increased 108 per cent in 2005. I would like to thank all of our employees for their outstanding contributions to a record year."

Fourth Quarter Review

Sales to Maxtor, Western Digital, Hitachi Global Storage Technologies, and Seagate accounted for 31 per cent, 30 per cent, 20 per cent and 14 per cent of total revenue in the fourth quarter of 2005, respectively. Total finished disk shipments were 29.7 million in the fourth quarter of 2005. Finished disk shipments for desktop and consumer electronics applications together represented 94 per cent of Komag's fourth quarter 2005 unit shipment volume. Disks for high-end server drives represented 6 per cent of finished disk shipments in the fourth quarter of 2005.

High capacity 3.5-inch advanced disks at storage capacities of 100GB and greater represented approximately 36 per cent of Komag's total finished disk shipments in the fourth quarter. These disks are primarily targeted for multi-platter consumer applications. These rapidly growing applications include PVR, DVR, HDTV, external storage, gaming and other home entertainment devices.

Other revenue, which includes sales of aluminum substrates, nickel-plated polished aluminum substrates and textured substrates, was 13 per cent of total revenue in the fourth quarter of 2005. Komag is the world's largest hard disk aluminum substrate manufacturer. Disk substrates are primarily produced for internal use in the manufacture of finished disks. In addition, the high quality of Komag's substrates has led to continuing market opportunities to sell substrates externally.

Business Outlook

"We exited 2005 with supply and demand for finished media and substrates tighter than when we entered the year. Early indications for 2006 are that overall demand continues to be very strong and our factories are continuing to run at full manufacturing capacity. With the completion of the installation and qualification of equipment from our first capacity expansion, we expect to have approximately 31 million units of finished disk capacity in the first quarter of 2006. Based on current demand, we expect total revenue in the first quarter of 2006 to increase 2 per cent to 4 per cent from the fourth quarter of 2005. Net margin in the first quarter is currently expected to be similar to the fourth quarter at approximately 17 per cent to 18 per cent.

Additionally, in an attempt to keep up with the growing demand for media in 2006, our second capacity expansion is in process at our existing manufacturing sites in Malaysia. This additional capacity is planned to start to become available beginning in the second half of 2006 with total capacity of approximately 40 million disks per quarter by the end of 2006.

Our current capacity expansion plans are based on strategic supply agreements with several of our customers. As part of these agreements, Komag has made certain commitments to increase capacity and our customers have agreed to purchase certain amounts of media. In addition, our customers have agreed to make certain pre-payments for media to help mitigate the cash impact of the capital spending required for Komag to increase capacity.

We believe that these arrangements with our customers are the right strategy to allow for prudent capacity increases to meet the continuing growing demand for media, as disk drives further expand penetration into multiple growing consumer applications. We expect to fund the capital spending for the capacity expansions of both our finished media, as well as substrates, from cash generated from operations and the pre-payment arrangements. Total capital spending for 2006 is currently expected to approximate $200 million to $250 million.

In December of 2005, Seagate and Maxtor announced that Seagate plans to acquire Maxtor. Both Seagate and Maxtor are customers of Komag and we have strategic supply agreements with both. Also in December of 2005, Seagate and Komag reaffirmed our strategic relationship. Upon the closing of the acquisition of Maxtor by Seagate, Seagate would be the successor to the strategic supply agreement between Maxtor and Komag. We anticipate that after the closing of the acquisition we will be supplying Seagate volumes of media that approximate the sum of both the Seagate and Maxtor agreements.

Komag is committed to continuing to support the growing demand for digital storage by maintaining our low cost manufacturing structure, providing advanced technology products and providing rational capacity increases, as appropriate with strategic supply arrangements with our customers, all with the goals of growing our business and providing financial returns to our stockholders," said Mr. Tan.

For more information about Komag, visit Komag's Internet home page at http://www.komag.com The Investors section of the website provides a variety of financial and investor information, including an investor presentation. To request an investor packet, call Komag's Investor Relations at 408-576-2901.

&

Investor's Business Daily:
Disk Maker Finds Growth In Store, Thanks To Changing Market
Wednesday January 25, 7:00 pm ET
By Steve Watkins

The world is quickly becoming a digital place, and Komag is storing much of that digital data.
The company makes disks that are used to store all kinds of digital data. They include data for computers, digital video recorders and game boxes, all the way up to big storage systems for businesses.

Desktop and consumer electronics uses make up the bulk of Komag's (NasdaqNM:KOMG - News) disk business. These end markets generated 92% of sales during last year's third quarter.

The disk industry used to be tied to personal computer sales. That started to change a year or so ago. Disk drives began to become a staple in video recorders, game boxes, stereos and home entertainment systems.

"The explosion of digital content is increasing digital storage requirements," said Peter Norris, Komag's executive vice president in charge of strategic business development. "The demand side of the equation has changed dramatically, and it's accelerating."

The number of drives sold in the U.S. grew about 20% last year, Norris says. Disk sales increased even more -- closer to 30% -- because the number of disks per drive is rising as storage demand surges.

The rise of digital video means more disks are needed for each hard drive to store all that extra data.

"A new era is dawning," said Rich Kugele, an analyst and principal at Needham & Co. "The drive industry fundamentally is the healthiest it's been in the five or six years I've been covering it. It's become a ubiquitous form of storage."

To meet rising demand, Komag has been boosting its capacity. The company makes disks in Malaysia, a low-cost region. It plans to notch its capacity up to 31 million disks a quarter by the end of the first quarter and to 40 million by year-end. It sold 27.5 million in the third quarter.

Demand is such that Komag already has customer commitments to buy some of the extra products it can make. Some customers even prepaid for the added supply. Komag is using that upfront cash to help pay for the expansion.

"That's a first in the history of the industry, as far as we can tell," Norris said of the upfront payments.

Customers such as Seagate Technology (NYSE:STX - News) and Western Digital (NYSE:WDC - News) want to make sure Komag can keep the disks coming. That shows how powerful demand is.

"The industry is scrambling to keep up," Kugele said.

Favorable Shift

The new sources of demand signal a long-term change in the hard-disk drive market, Norris says. It used to be seen as cyclical, linked to the whims of personal computer sales. No more.

"This demand-side shift is still in its infancy," Norris said.

The trend is reflected in Komag's results. The company turned a profit 11 straight quarters after it emerged from bankruptcy in 2002.
Third-quarter earnings nearly tripled from the prior year to 97 cents a share. Sales rose 76% to $180 million.
Analysts polled by First Call expect full-year 2005 earnings to come in at $3.45 a share, a 94% increase from the prior year. They see 2006 earnings climbing 10% to $3.81 a share.
Demand is such that even one of the industry's usual concerns -- pricing -- is not a big issue right now. Prices typically dip 5% a quarter, says analyst Andrew Golomb of Morningstar. That hasn't taken place in recent quarters.
"There's such insatiable demand for storage that it hasn't been a negative pricing environment for Komag," Golomb said.
He figures Komag will run at 100% capacity the next few quarters, though he does expect prices to start falling again in the long term.
Customer concentration is another issue. Komag's top four customers make up 95% of sales. That list will shrink to three when one of the customers, Seagate, completes its acquisition of another customer, Maxtor (NYSE:MXO - News). The deal is expected to close in the third quarter.
The merged company will honor long-term deals with Komag that each has signed separately.
"That will give Komag over 50% of its revenue coming from one customer (Seagate)," Golomb said. "Without a doubt, it's a pretty big concern."
Some observers downplay the problem. Norris points out that the four customers, which also include Western Digital and Hitachi Global Storage Technologies, make up 80% of the hard-disk drive market.
"The (Seagate-Maxtor) merger doesn't change the total demand for disk drives," he said.

Out One Door, In Another

Norris says that if Seagate loses some customers after the merger, the rivals most likely to pick up that business are also Komag's customers.
Komag primarily competes with its own clients. Seagate and Maxtor make their own disks. They just use Komag for more capacity.
There's no sign of that changing anytime soon.
About half of the industry's sales come from outside disk makers such as Komag, Norris says.
"In the near term, they'll be OK," Golomb said. "But in the long term, they're competing with their own customers, so they lack pricing power."
Komag's added capacity also could set it up for trouble in a market downturn.
"If you ramp up too much capacity too quickly, you get a glut in the marketplace," Golomb said.



just awesome  ;D

thanks Michael for geting this stock on my radar
Oliver

KOMG: Bear Stearns Ups to Outperform from Peer Perform; Sets Tgt @ $61; Analyst Notes
Thursday , January 26, 2006 07:51 ET

Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  Bear Stearns Cos.
Ratings Action: UPGRADE
Current Rating: Outperform (from Peer Perform)
Target Price: $61.00
Analyst Comments: The firm has upgraded shares of KOMG following strong results, stronger outlook, and healthier near-term trends.
This rating information was reported by TheFlyOnTheWall.

http://www.knobias.com/individual/public/news.htm?eid=3.1.d4e95f4323a8b010191243cca8952c8990da108aaadf069e91decf5b0752d3c3
&
Komag    KOMG    Piper Jaffray    Outperform    $50 » $55
&
Komag    KOMG    Kaufman Bros    Buy    $45 » $50
&
Komag    KOMG    Needham & Co    Strong Buy    $48 » $54

http://www.briefing.com/Investor/Public/MarketAnalysis/Calendars/UpgradesDowngrades.htm
cheers
Oliver

On January 31, 2006, Komag, Incorporated ("Komag" or the "Company") entered into a third amendment to its strategic supply agreement with Western Digital Technologies, Inc., a wholly owned subsidiary of Western Digital Corporation ("WDC") for increased media supply in 2006 and early 2007 in connection with a related increase in production capacity. This agreement calls for certain purchase commitments and pre-payments by WDC and certain supply commitments by Komag for finished media.

In order to meet the increased customer commitments for finished disks, the Company will purchase additional production equipment and accelerate delivery of some equipment for both finished media, as well as aluminum substrates included in the capacity expansion currently in process for the second half of 2006. As a result, total finished disk capacity is now expected to approximate 43 million disks by the end of 2006. Due to the purchase of additional equipment and the acceleration of delivery and installation of some previously scheduled equipment, the Company currently expects 2006 capital spending related to finished media and substrates to range from $250 million to $300 million, compared to prior estimates of $200 million to $250 million.

This report contains forward-looking statements relating to levels of incremental new media capacity expected to be added by the Company in 2006, and the Company’s expected capital expenditures for 2006. These statements involve known and unknown risks and uncertainties that may cause the Company’s or its industry's results, level of activity, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. These risks and uncertainties include, without limitation, the Company’s ability to achieve its operating yield, cost and profitability targets, changes in the currency exchange rate for the Malaysian ringgit as a result of the managed float system, continued customer demand and the impact of demand variation on factory utilization, the performance by the Company and its customers of their obligations under the respective increased capacity arrangements, changes in demand as a result of the proposed Seagate/Maxtor merger or otherwise, the Company’s ability to increase its capacity, variability in demand and associated impact on average selling price of disks, the Company’s ability to satisfy customer qualification requirements and meet shipping demands, the Company’s expectation that industry unit demand will continue to grow and not decline and, the Company’s ability to produce new generation disks in volume and the other factors described in the Company’s reports filed with the Securities and Exchange Commission, including, but not limited to, its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Hi Oliver and the rest of the 3SOF community,

I guess we are a few business people around here. I am not sure what businesses you guys are in but try to imagine a business like this:

• You are running at 100% capacity
• Your customers are begging for more of your products
• Your customers are willing to finance the expansion of your capacity by prepaying for your product
• Your customers are committing to orders one year out in the future
• Your largest customer issued a press release just hours after he had taken over your second largest customer that he would continue to buy your products

Well if you guys are working in a company like this. Stop investing in the stock market and start investing in your own company. If not then KOMG might be a good investment.

This is a fantastic opportunity. I have never seen a company being traded at these PE levels with this kind of visibility on earnings and such a huge short position.

Mike

KOMG UPDATE  ;)

Hoefer & Arnett Raises Komag's Earnings Estimate & Target Price
Friday , February 03, 2006 11:34 ET

SAN FRANCISCO, Feb 03, 2006 /PRNewswire via COMTEX/ -- Last night, Komag signed an amendment to an agreement with Western Digital which will increase its manufacturing capacity to 43 million disks per quarter by the end of this year. As such, we are increasing our fiscal year 2006 estimates for Komag from our previous forecast of $4.27 per diluted share on revenues of $790 million to our new forecast of $4.77 per diluted share in net income on revenues of $850 million. We are also increasing our one year target price from $51 to $58.
Hoefer & Arnett Incorporated is a member of the National Association of Securities Dealers, CRD number 10883.

&

30 SLIDES KOMG FEBRUARY IR PRESENTATION:
http://www.komag.com/investors/presentations/KOMG4Q05_Feb06.pdf

please review the updated KOMG informations carefully!

cheers
Oliver

Hi Oliver,

Didn't you forget to raise your target?

According to my math 15 x $4.77 is $71.55  ;)

Hoefer and Arnett is for KOMG what Piper Jaffray is for VPHM. They have covered KOMG with buy recommendations since it traded around 8 and do regularly raise their target. Their target now is based on a PE of 12.

I think 12 is very low based on the revenue and EPS growth:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=14694;image)

It all comes down to the risk/reward ratio. According to the presentation you linked to there will still be a shortage of media at the end of 2006 based on a 15% HDD growth. Based on some very simple math that means that we automatically will have an increase in Revenue and EPS in 2007 (as the new capacity will be phased in during this year but will contribute 100% during 2007). There are only very few companies that has that kind of earning visibility so the operational risk is very low. In addition their cash balance is growing very rapidly (now standing at $205 million). By the end of 2006 they will have around $340 million in cash I would expect that they soon either will pay dividend or more likely buy back shares at these low prices.

Now combine all this with a short position of almost 8 million shares or 23% of fully diluted shares outstanding. These poor souls have lost at least $100 million till now. I honestly don't think they have a clue about how to cover.

They shorted KOMG based on a number of analysts predicting that HDD would fast go out of fashion. Now the same analysts think that the HDD industry is the hottest sector around and the shorts are left in the dust.

With the earning visibility it is very unlikely that we will get negative earning surprises. There is no litigation that can negatively influence the price. They can obviously influence one or two analysts to downgrade the stock but I really don't see investors paying much attention to downgrades at these levels.

So what are the shorts going to do?  Somehow they have to buy 8 million shares and I can only see that driving the share price up probably higher than the different targets we are talking about now  (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=3073)

Mike

I will just hold all my KOMG shares enjoying the stock movement in 2006  >:D >:D

Definetly one of my long term stocks.....

cheers
Oliver
8)

Thomas Weisel conference presentation:
http://www.komag.com/investors/presentations/TWeisel_Feb06.pdf

HI Oliver,

It seems this thread has become our private corner! I am really surprised that the rest of the team can't see the value in KOMG. Good the market can!

You were a bit skeptical about my $90 target so I was happy when I stumbled over Smartmoney's pricecheck and they calculated a target of $91: http://www.smartmoney.com/pricecheck/index.cfm?story=worksheet&symbol=komg&nav=pc%20_snaps

Now I really don't recommend using the pricecheck as an investment tool but it is always nice to have some confirmation.

It seems like HDD is getting into more and more households goods. LG just announced that they have added Hard disks to their flat TV range. This could drive demand for disks even higher in the years to come. (Combined with MP3 players, playstations, mobile phones, HDTV etc. (ups - I almost forgot Laptops and PC's   :o)

KOMG has formed a nice base the last couple of weeks and I think we are ready to continue our journey to the north.

Mike

KOMG: Short Interest DN 24.0% to 6.0M in Feb 2006

Tuesday , February 28, 2006 06:00 ET

According to new short interest data from NASDAQ, short interest for Komag Inc (NasdaqNM: KOMG) DECREASED 24.0% to 6,046,773 shares for the month ended mid-February, 2006.

SYMBOL       JANUARY        FEBRUARY          CHANGE       %CHANGE     DAYS/COVER
--------   -------------   -------------   -------------  ------------  ----------
KOMG           7,955,726       6,046,773      -1,908,953       -23.99%           6
Based on KOMG's 20-day average daily share volume of 1,054,590, it would require approximately 6 day(s) of buying to cover this short interest.

Hi Oliver,

So the shorts are getting tired of loosing money on Komg. Can't blame them - it is a hell of a lot more funny to earn money on KOMG  ;)

We are trading in a range between 46 and 50. We will break 50 that is only a matter of time. Without being a technical trader I would expect to see a sharp move up from there.

Mike

Hi Oliver,

So 50 is cleared and we are on the way to 90  ;)

Forward PE is below 11 and we still have more than 20% of the float short. With the earnings visibility I have no clue how they are going to cover with out forcing the price up!

I am wondering if you and I are the only 3SOF's that are holding KOMG.

Mike

Well, theres me... I'm in since 42.

Great pick Michael.

Hi Michael, I was watching from about $40 and jumped with your recommendation yesterday.
Thanks very much Mike.

uc.

Ps. Got in on CTE recently as well. Bit of a down day today.

awesome day for KOMG 1 >:D
KOMG: Volume Spike; 41% > 20-adsv, Stock +7.17%
Friday , March 03, 2006 13:25 ET

This is the 1st VOLUME alert for KOMG in the past 7 calendar days.

Trading for Komag Inc (NASDAQ NM: KOMG) has been heavier than usual in today's session. By 13:25 ET, the stock had already traded 1,425,800 shares via 3,041 trades. The cumulative volume is 41.41% above its 20-day average of 1,008,300. Normally the stock experiences around 2,274 individual trades per session.

So far, today's volume surge has caused a net rise in KOMG's stock price. At the time of this alert, the stock was trading at $53.990, up $3.610 (+7.17%).

One year ago, the Company's shares closed at $21.800. The price has gained more than 147 percent since then.

Over the last 10 trading session KOMG has traded in a range between $46.070 and $51.400 and is currently trading 5.04% above its 52-week high of $51.400 set on February 22,2006 and 176.45% above its 52-week low of $19.530 from April 18,2005.

In the previous 3 sessions, KOMG trading has displayed a mixed trend. Closing results have been as follows:

March 02, 2006 --- closed at $50.380 up $0.340 (+0.68%) on 1,029,200 shares
March 01, 2006 --- closed at $50.040 up $3.200 (+6.83%) on 1,242,000 shares
February 28, 2006 --- closed at $46.840 down $0.750 (-1.58%) on 1,161,800 shares

I will of course continue to hold KOMG, thanks for the article Michael.

Oliver

QuoteKomag (KOMG) added 3.10 to 53.48 in heavy trade. In late January, the data storage company reported its third straight quarter of triple-digit earnings growth. Mutual fund ownership has also increased from 96 funds in March 2005 to 149 in December. Its Technical and Overall Ratings of 99 from IBD Stock Checkup ranks it No. 1 out of 24 stocks in the Computer-Data Storage group.

No. 1 in one of the hottest sectors around (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=3313;image)

Mike

I love it:

Komag sees 1st-qtr revenue at high end of outlook
Mon Mar 6, 2006pm ET170

LOS ANGELES, March 6 (Reuters) - Komag Inc. (KOMG.O: Quote, Profile, Research), a maker of computer disk drive components, said on Monday it expects revenue in the first quarter of 2006 to be at the high end of its previous outlook for a 2 percent to 4 percent increase over the prior quarter.

cheers
O.

I see that guidance report, and then the stock drops pre-market. I just don't get it sometimes.

uc.

 ::) ::)

1)
KOMG: Matrix Cuts to Hold from Buy; Analyst Notes
Tuesday , March 07, 2006 08:58 ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  Matrix
Ratings Action: DOWNGRADE
Current Rating: Hold (from Buy)
Analyst Comments: The firm's downgrade is due to valuation.

2)

WDC: Kaufman Bro Cuts to Sell from Hold; Cuts Tgt to $20 vs $22; Analyst Notes
Tuesday , March 07, 2006 08:50 ET
Issuer: Western Digital Corporation (NYSE: WDC)
Analyst Firm:  Kaufman Brothers L.P.
Ratings Action: DOWNGRADE
Current Rating: Sell (from Hold)
Target Price Action: DECREASE
Target Price: $20.00 (-9.09% from $22.00)
Analyst Comments: The firm's checks suggest a major price battle began as the various HDD players in February, and that this resulted in price declines.


3)
Disk Drives Lower on Pricing Fears, Downgrade
Tuesday , March 07, 2006 09:39 ET
Hard disk drive manufacturer Komag (KOMG) today updated its Q1 outlook to the high end of its previous 2-4% projected sequential advance, followed by another sequential revenue gain in Q2. However, KOMG (-4.5%) was downgraded by Matrix to Hold from Buy on a valuation call. Kaufmann Brothers noted HDD price declines of 10-12% since early February. The firm cut Western Digital (WDC -3.9%) to Sell, but reiterated its Buy rating for Seagate Technology (STX -1.9%). HTCH (-1.5%) and MXO are also opening lower today.

Hmmmm....... Doesn't this really show how irrational the market is.

Lets assume that there is an upcoming price war between the HDD producers.

It is a few years ago I studied economics but as fare as I rememver demand for a product increases if the price is lowered. (correct me if I am wrong  ;))

Now if you as KOMG are making parts to HDD's which already is in short supply any increase in demand should kind of benefit you shouldn't it?

So why is KOMG down today after they have just given very strong guidance.

Hmmmm..... I guess this is a good buying opportunity!

Mike

yahoo quotation:
Matrix Research is a real dumb idiot. It downgraded KOMG on Dec 13 from Buy to Hold when it was trading at 36. It is downgrading from Buy to Hold again. It cannot even remember what it did last time. If you bought when it downgraded at 36, you would have made 50% profit in just 3 month.


Analyst 70 slides presentation:

http://www.komag.com/investors/presentations/06mar_analyst.pdf

Agenda:

HDD and Media Review
Market Overview
Capacity Expansion Plans
Technology Review
Financial Review
Q&A

enjoy it !!
cheers
Oliver

Very strange:

Matrix has downgraded KOMG form Buy to Hold on Dec 13, 3 month ago.. And it is repeating the exactly the same downgrade with the same explanation.
How can it downgrade twice from Buy to Hold?

Short attack supported by Matrix??

cheers
Oliver

SB MANSKY KOMG report:

We are maintaining our Buy rating and $56 price target on Komag shares based on
our views that our above consensus estimates continue to carry meaningful
upside potential on shares that are currently trading at 11x CY06 EPS. That
said, the disk drive group as a whole has performed admirably since the
beginning of December 05, culminating with a 7% appreciation in Komag last
Friday off a short squeeze. Although the fundamental story remains very much
intact, in our view, we suspect investors will be keen to lock in profits ahead
of any perceived deterioration in sentiment. With little by way of incremental
news flow expected from the industry prior to earnings (mid-April) leaving only
the alarmist commentary recently raised surrounding disk drive pricing, the
shares will likely remain range bound near-term. We look to this as an
opportunity for accumulation. Our sensitivity analysis suggests CY06 EPS
upside to ~$4.80 with a 12-13x multiple range implying fair value of $58-$62.

* Supply / Demand Remains Attractive

The company reiterated its intention to exit the current year with capacity at
43M units/quarter, up from 30M at the end of December 2005. Inclusive of the
updated outlook per the 8-K filing ahead of the meeting, we suspect management
is targeting ~31M exiting March, ~35M in June followed by ~39M and 43M in the
remaining two quarters of the year. Although a portion of this incremental
capacity will be attributable to yield/process improvements, the bulk is
directly a function of capital deployment, which is substantially being funded
by customer pre-payments. Management indicated that substrate and media
capacity will scale in tandem and that the required facilities are now in place
with equipment installation commencing in the next several weeks. That said,
our supply/demand analysis suggests that industry capacity will likely struggle
to keep up with demand over the coming 12 months, which has favorable
implications for both Komag and HDD industry-level pricing (in contrast to
recently voiced concerns). Even so, given risk of bumpiness surrounding
industry inventory management, seasonality, and the Seagate (STX: $24.86; 1H)
acquisition of Maxtor (MXO: $8.97; 2S) our Komag model adopts what we view as a
base-level assumption set with respect to capacity utilization. Our current
estimates assume 100% utilization in the existing quarter, dropping to 95%, 90%
and 89% in the ensuing three quarters for a blended 94% for the year. This
compares to management's target utilization rate of 90-100% per quarter and the
100% level the company has been operating at for the past year. Should we
employ 93% utilization ratably throughout the final nine months of the current
year, using a mid-point of the company's 13-20% net margin target our
sensitivity model suggests CY06 EPS of ~$4.80 versus our current $4.36 and
consensus of $4.23.

Citigroup Global Markets Inc. is an advisor to Maxtor Corp in its proposed
merger with Seagate Technology Inc.

* Ramp of 2.5" in CE Appears Imminent.

The company has been indicating since early to mid last year that it sees an
opportunity for aluminum based media to supplant glass in some 2.5" portable
environments. Historically (through today), portable applications have been
dominated by glass-based media given more attractive shock resistance
characteristics versus aluminum. That said, changing market conditions and
technology advances have opened the door for aluminum based media.
Specifically, the notebook market continues to come under pricing pressure
driven by increased competition and a shift toward "value" products. With
advancements in head/suspension technology and disk drive intelligence reducing
the significance of the shock resistance advantage of glass, coupled with
~$1.00 lower ASP's per unit versus glass, aluminum is being considered by at
least two HDD manufacturers (and their respective customers) as an alternative.
We suspect an additional incentive surrounding this consideration relates to a
risk-mitigation strategy associated with the transition to perpendicular in
glass-based notebook drives, discussed below. Further, several "quasi-
portable" products in the consumer electronics market have incorporated 2.5"
notebook drives, most notably X-Box and we suspect PlayStation3 in the gaming
segment. Although notebooks represent an attractive opportunity over the
longer-term, we believe this latter segment represents a attractive and likely
more proximate market for aluminum-based 2.5" drives. Management stopped just
short of confirming these suspicions yesterday as indicated that non-notebook
applications could yield several million aluminum-based units for the company
during the current year, translating to a few percent (~2-3%) of sales. This
compares to our existing estimate of ~600k 2.5" aluminum PC/CE units at <1% of
revenue.

* On Tack with a Measured Transition to Perpendicular Recording (PMR)

Komag anticipates that the sweet spot of its target market (3.5" desktop and
consumer), which represents ~93% of the company's unit volume, will not make
the shift to PMR technology until early 2007. The basis for this is the
ability to drive incremental areal density from aluminum based media via
etching, which should afford existing longitudinal recording technologies the
ability to scale to 200GB per platter (150GB per sq. inch) versus the 160GB
platters that are just now ramping in volume at a handful of manufacturers.
All products beyond the 200GB per platter density will likely be PMR-enabled.
Management believes, and we concur, that glass-based disk drives will be the
first to adopt PMR technology given glass cannot be etched and, as such, is
more quickly encroaching upon density limits under existing recording
technology (superparamagentic limit). Accordingly, the notebook and small form
factor markets are expected to be the first to see PMR, as already reflected in
early product introductions from Seagate, Hitachi and Toshiba. Komag does not
currently participate in the glass-based media segment and has no intentions to
do so. That said, we nonetheless believe that the company is working to
introduce PMR-ready media in its enterprise line (~7% of CY05 units) by mid-
year 2006. PC and consumer are expected to follow sometime in 1H CY07.
Although specifics around pricing were left from the discussion, management
indicated that the company does expect costs for PMR to initially be greater
than existing media, but at volume the margin profile is expected to be
comparable.
VALUATION

Our price target for Komag shares is $56. We employ both Price/Sales and
Price/Earnings as our valuation methodologies but reply upon our P/E output as
the primary price target determinant. The basis for this is what we view to be
the company's reduced sensitivity to revenue levels versus both its own history
and its peers due to lower deprecation costs as well as increased profitability
attributable to Malaysian-based manufacturing and internal substrate supply.
We view the majority of these advantages as sustainable. The company's direct
comparables include stand-alone disk drive manufacturers Seagate, Western
Digital and Maxtor as well as component provider Hutchinson Technology.
Although the company also competes against several international companies
including Showa Denko, Fuji Electric, Hoya and Asahi Glass, given each derives
the majority of their revenue from sources other than the HDD media market, we
do not view them to be relevant comparables from a valuation perspective.

Based on our estimates, Komag is currently trading at 1.9x CY06 sales and 11x
CY06 EPS. On a comparative basis, the company's mean, high and low forward
revenue multiples over the prior two years have been 1.1x, 1.7x and 0.7x,
respectively. Conversely, the shares forward earnings multiple range over this
same period have been 10x, 13x and 7x, respectively.

With respect to our Price/Earnings valuation, we are assigning a 13x multiple
to our CY06 EPS estimate, for a $56 (rounded) price target. In our view,
investments in the disk drive industry have historically been based upon short-
term horizons (12 months or less) due to the rapid manner in which industry
fundamentals can change. As such, our upside bias to earnings in 2006 and 2007
merits a target multiple at the high end of the range, or a premium thereto.
Accordingly, we are applying a multiple that is in-line with the shares two
year high of 13x. Had we opted to employ a Price/Sales valuation, we would
consider a 25% premium to the shares historical range given the company's
continued ability to deliver superior growth and profitability versus
historical levels. Applying a 2.0x multiple to our revenue forecast suggests a
target price of $54.

RISKS

We rate shares of Komag as High Risk. Our risk rating reflects our views
related to the stock's price volatility (Beta = 1.8 weekly since 12/2003 per
Bloomberg), earnings stability, and current balance sheet health ($2.95 net
cash/share). Although we acknowledge the company's prior Chapter 11 status
merits consideration, with the improved capital structure including lower
levels of debt at more attractive terms and the sale of spare facilities,
Komag's post-restructuring operating efficiency has minimized the chance for
recurrence.
Risks to the stock achieving our valuation target include the following:

* Incremental industry capacity coming on-line in calendar 2006. Throughout
calendar 2005 the dominant theme within the disk drive industry has been
tight supply amidst strong demand. Exiting the year, we expect aluminum-
based media/substrate remains tight, while glass-based media is short of
demand. In order to restore balance, many of the media and substrate
suppliers to the market, both captive and merchant, are expected to increase
capacity in the coming year. Our current expectations are that, absent
Komag, the bulk of this incremental capacity will be in glass-based media at
2.5" and below. Although considerable barriers are present related to
redeploying capacity, most notably the ability to procure substrate, should
the market more aggressively pursue aluminum versus glass, Komag's
utilization rates and margins could be negatively impacted. Similarly,
should this incremental capacity be met with lower than expected demand
levels, the company would likely fail to meet our estimates and price
objective.

* Introduction of perpendicular recording could reduce disk-per-drive ratio.
We expect the industry to begin to more broadly introduce disk drives
utilizing perpendicular magnetic recording (PMR) technology during the latter
half of calendar 2006. PMR holds the promise of re-accelerating the areal
density curve, or the amount of data that can be stored per square inch of
surface area, which is required for the disk drive industry to maintain a
trajectory that is consistent with Moore's Law. However, should this
expected improvement in recording density not be offset by an equal increase
in storage demand, disk drive unit volumes will likely face deceleration.
Such was the case during the 1997-2002 period, during which a sizable
industry capacity build-up amidst strong unit demand was met with the
introduction of a new recording technology (MR, or magneto-resistive),
resulting in broad under-utilization of capacity and significant operating
losses. Given their exposure to both disk drive unit volumes and the average
number of disks per drive, this scenario was disproportionately negative for
component suppliers, including Komag. We believe that the industry and Komag
are better positioned versus the 1997 example due to a lower desktop disk-
per-drive ratio entering the transition (1.7:1 vs. ~3:1), new storage-hungry
end-markets (consumer) and tighter supply. Reflecting this, our estimates
assume only a modest contraction in the disk-per-drive ratio beginning in
calendar 2007. Should our ratio assumptions prove to be too aggressive, the
company's ability to achieve our estimates and price objective will be
materially challenged.
* Customers are also competitors. In addition to procuring media and/or
substrate from Komag, several of the company's largest customers also have a
captive source of supply. Specifically, Maxtor/MMC and Seagate, which
together accounted for 54% of revenue in the September 2005 quarter,
manufacture a significant portion of their own media. Although each has
recently entered into multi-year volume purchase agreements (VPA's) with the
company, there is no guarantee and only limited recourse should said volumes
fail to materialize. If end-demand proves to be weaker than generally
expected, or the transition to perpendicular recording proves more disruptive
to unit demand or the disk-per-drive ratio, industry utilization rates will
be materially negatively impacted. Under this scenario, Komag's customers
who have captive media operations would likely source a greater percentage of
their media and/or substrate requirements internally. Related, Seagate
recently announced its intentions to acquire Maxtor. Our current assessment
is that this acquisition poses little near- to intermediate-term risk and
only modest long-term risk for Komag. However, history has demonstrated that
consolidation in the HDD industry comes in waves. Should this prove the
case, we view Western Digital as the most acquirable company remaining due to
the company's status as the last remaining stand-alone drive manufacturer of
scale, excluding the combined Seagate/Maxtor entity. If Western Digital were
to be acquired by a third party that has alternative media suppliers, our
estimates and price target would likely prove unachievable.

* Market acceptance of aluminum-based notebook drives is uncertain.
Historically, glass-based media has dominated the notebook disk drive market
(2.5" and below) due primarily to superior shock resistance characteristics
versus aluminum. However, given improvements in head and suspension
technology and disk drive intelligence, Komag's position is that aluminum-
based media is now an acceptable alternative in mobile compute environments.
We believe several of Komag's customers (disk drive manufacturers) are
currently developing aluminum-based notebook drives. However, there is no
assurance that notebook OEM's will either qualify or ship said products in
volume. Although we see little downside risk to our current estimates
associated with notebook penetration (<$3M in CY06), with the notebook market
continuing to gain share from desktop PC's, failure to penetrate this market
may result in a declining addressable market for Komag. Conversely, given
the significant volume opportunity associated with modest penetration of the
notebook segment, should this endeavor prove more successful than our current
assumptions, our estimates could prove to be materially conservative.

INVESTMENT THESIS

We rate Komag shares as Buy/High Risk with a $56.00 target price. Although the
shares appreciated over 80% between January 3 and December 30 2005, leaving the
bulk of the returns arguably behind investors, we see room for continued upside
driven by simultaneous multiple and estimate expansion. In the context of
expectations for continued strength in end-demand for disk drives in 2006, our
above-consensus estimates are based on our views related to the company's
leadership in key aluminum substrate manufacturing, incremental unit volumes
associated with recently signed purchase agreements, and the potential for an
increased addressable market (notebook).
SUMMARY
* Inclusive of updated capacity targets,
our supply / demand model suggests tight
substrate/media availability will persist
through the year.
* PMR transition will be slow and steady.
Mgmt expects to push 3.5" (93% of units)
through at least one more spin
(200GB/platter) prior to adopting PMR in
1H07. Enterprise (~7% of units) on track
for mid-year 2006.
* Opportunity in 2.5" is near, with game
consoles appearing most proximate. Mgmt
expects MM's of 2.5" AlMag units in CY06
(2-3% of sales) vs. our current 600k and
<1% fcst.
* Maintaining Buy rating and $56 price
target. The solid returns over the past
month will likely see near-term
consolidation due to seasonal concerns and
the lack of news flow prior to March
earnings. With the fundamental story
intact and compelling potential for upside
vs. our above-consensus CY06 estimates,
our mid-to-longer-term view is to
accumulate during this period.


Link list for this report:

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1602527417&tid=stx&s id=1602527417&mid=31383

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1602527417&tid=stx&s id=1602527417&mid=31384

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1602527417&tid=stx&s id=1602527417&mid=31385

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1602527417&tid=stx&s id=1602527417&mid=31386

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1602527417&tid=stx&s id=1602527417&mid=31387

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1602527417&tid=stx&sid=1602527417&mid=31388

update:
KOMG: Merrill Lynch Sets @ Neutral; Analyst Notes
Thursday , March 23, 2006 08:31 ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  Merrill Lynch & Co.
Current Rating: Neutral
Analyst Comments: The firm is resuming their coverage on the stock.

bounced back from 50EMA

KOMG: Short Interest DN 4.5% to 5.8M in Mar 2006
Friday , March 24, 2006 16:19 ET

According to new short interest data from NASDAQ, short interest for Komag Inc (NasdaqNM: KOMG) DECREASED 4.5% to 5,774,184 shares for the month ended mid-March, 2006.

SYMBOL      FEBRUARY           MARCH        CHANGE       %CHANGE     DAYS/COVER
--------   -------------   -------------   -------------  ------------  ----------
KOMG           6,046,773       5,774,184        -272,589        -4.51%           5

Based on KOMG's 20-day average daily share volume of 1,263,760, it would require approximately 5 day(s) of buying to cover this short interest.

Komag's disks drive rising profits
By Rex Crum, MarketWatch
Last Update: 6:32 PM ET Apr 3, 2006

SAN FRANCISCO (MarketWatch) - In the market for computer hard disk drives, production capacity is king. And these days, no disk-drive maker can match the capacity of Komag Inc.
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KOMG46.24, -1.36, -2.9% ) churned out almost 30 million disks in the fourth quarter, when its factories were operating at near-100% capacity. The firm is expected to top that total when it reports first-quarter results on April 26.
The San Jose, Calif.-based company is the top maker of aluminum disks used in the hard drives of Seagate Technology Inc., Western Digital Corp. and other market leaders.
Surging demand for digital storage, combined with tight supplies of the disks, has been a boon for the firm's business.
"We are in a real sweet spot right now," said Komag Chief Executive T.H. Tan, who is retiring near the end of the year.
In 2005, its full-year profits more than doubled to $115.6 million, or $3.55 a share. Sales rose 50% to $685.9 million.
Investors have found the ride just as sweet, as Komag shares doubled between October and early March. During the first quarter of the year, Komag shares climbed almost 39%.
"They've enjoyed tremendous interest in the last 18 months due to the tightness in supply of these disks," said Krishna Chander, a storage industry analyst with iSuppli, a technology research firm.

news update:
Hitachi and Komag Expand Strategic Supply Relationship for Hard Disk Drive Growth
Wednesday April 5, 4:00 pm ET
Increased Purchasing Capacity to Give Hitachi Greater Flexibility for 3.5-Inch Hard Drive Growth

SAN JOSE, Calif., April 5 /PRNewswire-FirstCall/ -- Hitachi Global Storage Technologies (Hitachi) and Komag, Incorporated (Nasdaq: KOMG - News) today announced an expanded strategic supply agreement for 3.5-inch disk media.

(Logo: http://www.newscom.com/cgi-bin/prnh/19990816/KOMGLOGO )

This agreement will allow Hitachi to increase its 3.5-inch disk drive production under a Hitachi five-year growth plan. The new agreement is based on the companies' existing relationship for disk media supply.

"Komag is a key media supplier to Hitachi, and we are pleased to be able to expand our long-standing relationship," said Bob Holleran, COO, Hitachi Global Storage Technologies. "The relationship we have with suppliers, like Komag, is an important element of Hitachi's broader 3.5-inch growth plan, and we value the reliability and quality they bring to our products."

"As one of the world's largest hard drive manufacturers, Hitachi is a key customer of Komag and we are very happy to be working with Hitachi to expand our capacity to support their media requirements," said T.H. Tan, CEO of Komag. "We plan on adding some incremental capacity to support Hitachi that is principally geared towards 2007 and beyond."

Through their collaboration, Hitachi and Komag are committed to meeting and growing worldwide demand for hard disk drives -- both for IT and consumer electronic applications.

KOMG is struggling today, trying to put in a Right Shoulder of a little Bullish Inverse H&S pattern (pattern in green) after suffering a quadruple failure (four days in a row) at the neckline of the BIG H&S Top, and at the Top of the Declining Channel off the February high.

The low of the Left Shoulder on April 24 is 41.63; today's low of the "possible" Right Shoulder is 41.68, which is a little bit higher, as it should be.

Off the 54.98 high, KOMG probably has at least as many Bear Moves at it had last year, when we identified "9 Bear Moves" in this stock in this folder, prior to the KOMG bottoming.

If you weigh the  width of this "possible" Bullish Inverse H&S Pattern against the width of the H&S Top, it doesn't look nearly good enough for a breakout, but a breakout would occur, nonetheless, on a takeout of the neckline: 45.09-45.17.  That also would be a channel breakout.

45.09 was the high on release of earnings, the response to which was a failure near the neckline of the H&S Top, resulting in "sell the news."

If KOMG can take out 45.09-45.17, next resistance is the declining 50DMA and the Right Shoulder of the H&S Top, at 47.17-47.76.

In the interim, the chart is bearish as long as KOMG trades below the neckline of the H&S Top (blue line), currently at about 44.55. The downside targets on the chart are IN PLAY.

KOMG has rallied off the 41.68 low and currently is BID 42.19...ASK 42.20, down $0.79.

Quote from: Melf Elf on May 11, 2006, 02:37:10 PM
KOMG is struggling today, trying to put in a Right Shoulder of a little Bullish Inverse H&S pattern (pattern in green) after suffering a quadruple failure (four days in a row) at the neckline of the BIG H&S Top, and at the Top of the Declining Channel off the February high.

The low of the Left Shoulder on April 24 is 41.63; today's low of the "possible" Right Shoulder is 41.68, which is a little bit higher, as it should be.

The Bullish Inverse H&S possibility was negated in the final hour yesterday.

Quote
KOMG has rallied off the 41.68 low and currently is BID 42.19...ASK 42.20, down $0.79.

The rally didn't hold up.  41.68 was taken down on some volume, following through to the downside after the quadruple failure at the neckline of the H&S Top, and at the top of the Down-sloping Channel.

Next support is just below here, at 40.81, then the 200DMA, at 38.78.

Ichimoku Kinko Hyo Chart:

Quote from: Melf Elf on May 12, 2006, 08:23:56 AM
Next support is just below here, at 40.81,

KOMG went down to 40.80 right from the open, held, then rallied against the serious tanking in the general market.  It couldn't hold onto the better portion of its gain on the day, but that's at least a moral victory under such lousy circumstances.

A weak "possible" double-bottom at 40.80 - 40.81 now is in place for a rally that needs to take out key resistance at 45.17.  It's "weak" because it's only a three-week pattern, going up against a four-month H&S Top (pattern in blue).

The first sign that KOMG has a chance of taking out 45.17 would be a rally above the top of the down-sloping channel (pattern in red), which comes in on Monday at about 43.75.  KOMG wouldn't be "out of the woods" just yet if it can do that (it has to take out 45.17), but that would be a good sign that it's got a chance of doing that.

The QQQQ is at key 40.16-40.19 support.  It closed at 40.19 exactly. (see next post). 

While the QQQQ hasn't broken down yet on a closing basis, KOMG not only broke below a H&S Top three weeks ago, it already has re-tested that neckline, has tried to rally above the down-sloping channel, and has failed both tests.

KOMG is providing leadership on the downside.  It would be a big help if KOMG could hold key 40.80 - 40.81 support here, and spring a "Bear Trap," by taking out 45.71 to the upside.

For those unfamilar, a "Bear Trap" is set by having us thinking that something is bearish, when it actually is bullish.

In this case of KOMG, it would be having us (incorrectly) thinking that the breakdown of the H&S Top was bearish, then having it turn out to be bullish.

The way that the "Bear Trap" gets sprung in this case, is for KOMG to complete this "possible" W-bottom by going up and taking out 45.17, which is:

1. an upside breakout of the channel (in red)

2. the middle of the "W" bottom, so a bullish pattern breakout

3. back above the neckline (44.41 - 44.50) of the H&S top

Unless/until KOMG does that, the chart is bearish, and the downside targets on the chart are IN PLAY.

The QQQQ is hanging onto key 40.16 - 40.19 support by a hair.  The close was 40.19.

See my post in the QQQQ folder on The World Market Indices Board, if interested in a more detailed analysis of the QQQQ.

Quote from: Melf Elf on May 13, 2006, 01:28:14 PM
The way that the "Bear Trap" gets sprung in this case, is for KOMG to complete this "possible" W-bottom by going up and taking out 45.17, which is:

1. an upside breakout of the channel (in red)

2. the middle of the "W" bottom, so a bullish pattern breakout

3. back above the neckline (44.41 - 44.50) of the H&S top

Unless/until KOMG does that, the chart is bearish, and the downside targets on the chart are IN PLAY.

KOMG just printed above 45.17.  It's fallen back a bit, but that's one of the few bullish-looking things Ive seen all week. 

;D

Interesting...while the QQQQ broke support and got smacked all week, KOMG has managed to rally back to broken support.

KOMG: FTN Midwest Res Starts @ Neutral
Tuesday , May 30, 2006 12:12 ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  FTN Midwest Research
Ratings Action: INITIATE
Current Rating: Neutral

and updated KOMG May presentation:
http://www.komag.com/investors/presentations/KOMG1Q06_May06.pdf

Bought KOMG at 42.32.  Stop: 41.08, below this week's low.  Risk: a loss of 2.9%

Quote from: Melf Elf on May 19, 2006, 12:53:45 PM
KOMG just printed above 45.17.  It's fallen back a bit, but that's one of the few bullish-looking things Ive seen all week. 

KOMG has been showing good relative strength lately.  It rallied for six or seven days in a row in a down market, and in this week's down market until mid-week, KOMG held $2 above its low.  The technicals also are much improved.

Melf,thanx for the great posts!

With my 1 minute look KOMG loks like a good short to me...  the 3 month trend is decidely down and with these small rallies it looks like a good short entry here in the 42's... MACD weekly still down...  I will be paper trading this one... still shorting SHFL from 32.65   BRCD is also a tempting short here at 6.10.. watching
cheers joe

Quote from: joet on June 16, 2006, 11:00:04 AM
Melf,thanx for the great posts!

With my 1 minute look KOMG loks like a good short to me...  the 3 month trend is decidely down and with these small rallies it looks like a good short entry here in the 42's...

joe,

I agree with you.  KOMG has been a great short since the break of the Bearish Rising Wedge in late March, and again at the break of the H&S Top in late April at earnings.

I'm taking a walk on The Dark Side here, playing KOMG long, but I think it's worth the roughly 3% risk, in case we've made at least a short-term bottom here. 

Basis the daily chart, I like the fact that KOMG "walked down the the top of the channel" (red), then held support at its 200 DMA, and then rallied back to its 50 DMA.  I also like the fact that KOMG didn't trade at a new low this week, along with the rest of the NASDAQ.  Good relative strength.

The 13/21 RSI and daily MACD look much better, too.  I'll show you the latter next.

KOMG - MACD (Daily)

I've been watching this discussion from the shadows and have joined Melf on the long; purchased this AM, in at 42.25.

Quote from: Melf Elf on June 16, 2006, 10:41:16 AM
Bought KOMG at 42.32.  Stop: 41.08, below this week's low.  Risk: a loss of 2.9%

Yesterday's low was 41.10, two pennies above my stop.  The close was 41.11, a penny above the low of the day, so I expect to get stopped out at the open.

Curses!  >:D >:D >:D

I should have taken a break even on Monday, whien I didn't like the H&S Top in the NASDAQ Composite, but we always can "coulda...shoulda...woulda."  I didn't do it.

I "jumped the gun" on my entry into KOMG, which is why I'm only willing to risk 3%.  As joet correctly pointed out, the trend has been down, and I am playing against the trend, anticipating that KOMG would break out "if" we put in a capitulation low in market last week.  BTW, I forgot to applaud joet for that good observation, which I do now, belatedly.

We still might have put in that capitualation low in the market, and based on that, I can justify moving my stop down the recent 39.16 low for a risk of a loss of 7.5%, which isn't bad, but I'm not going to do that.

I knew that I was playing against the trend, anticipating a trend change, and I didn't get it.  If I'm stopped out for a 7.5% loss on a stop out below 39.16, I will end up saying to myself....

YOU KNEW YOU WERE PLAYING AGAINST THE TREND, MELF.  HELLO???

;D  >:D

A 3% loss for doing that in a good stock like KOMG that looked promising, technically, is okay with me.  I was trying for a good entry before it broke out.  A 7.5% loss for doing that (jumping the gun) isn't okay with me.

I'll sell a print of 41.08 in KOMG for a 3% loss, even though I still like its chances of holding above 39.16, then breaking out.  Management decsion.

Melf you are not stopped out yet  :) atn42.25 as i write, i am looking at is as a short entry in the trend down???  I will probably just trade this one on paper... always learning...  lower highs make me feel that the trend is not broken yet, I bet you are taking profit as i write!  The fast line on MACD is trying to hang on but..

AAPL is tightening up in the 57s wonder which way it will break?  market trend is bearish for AAPL, would you say that if it breaks below 57,  56.60 would be a good short entry or would you expect that to be the spark for a bull rally... hope to hear your thoughts on the AAPL thread.

cheers joe

Quote from: joet on June 21, 2006, 09:55:51 AM
Melf you are not stopped out yet  :) atn42.25 as i write,

joe,

I dodged a bullet on that one so far...by TWO cents.  Whew! (we need a face on the toolbar that is sweating profusely).

:D

Quote
i am looking at is as a short entry in the trend down???

That's the way to play stocks like KOMG, that have been in a downtrend.  Shorting the re-test of the broken 44.41-44.50 neckline at April 26 earnings was a great short.  Shorting any of the failures at the 50 DMA also was a good short.

Here's the problem shorting it now: KOMG hasn't given up much, it's been basing above its 200DMA for almost two months, and the LONG-TERM trend still is UP. 

Quote
I will probably just trade this one on paper... always learning...

That might not be a bad idea.  This two-month base could be good enough now to go up and successfully challenge the three-month H&S Top. 

Think of the daily chart (posted this morning) as The Bulls having 3 players on the field (each of the candlesticks above the 3-month H&S Top) vs The Bears having only 2 players on field (each of the candles below the 44.41-44.50 neckline.

Although that favors the Bears, we have to remember that the long-term trend is UP, which favors the Bulls, and that KOMG has good fundamentals, which also favors the Bulls.

Quote
lower highs make me feel that the trend is not broken yet

That's correct.  The short-to-intermediate term trend still is down.

Quote
I bet you are taking profit as i write! 

That's incorrect.  ;D  >:D 

I'm hanging in there (by a thread this morning  :D), for the reasons that I bought it, initially.

Quote
The fast line on MACD is trying to hang on but..

I hear ya.  MACD is acting fine, but it's still below zero, and it could fail at or below zero if KOMG wimps out here, and doesn't go through the 50DMA and through the broken 44.41-44.50 neckline on this rally.

Yesterday's hold of 41.10 gives KOMG a chance at a "W"-bottom breakout.  The legs of the "W" are 41.09 and 41.10.  The midldle of the "W" is 43.95, so a print of 43.96 would put Target: 46.82 IN PLAY.

Math:

43.95 - 41.10 (the more conservative low) = 2.85 points
43.95 + 2.85 points = 46.80

Quote
AAPL is tightening up in the 57s wonder which way it will break?  market trend is bearish for AAPL, would you say that if it breaks below 57,  56.60 would be a good short entry or would you expect that to be the spark for a bull rally... hope to hear your thoughts on the AAPL thread.

I'm on the bearish side of neutral on AAPL.   57.67 broken support should have meant something, but it hasn't, so far.  APPL trades above and below it, willy nilly.  I'm leaving APPL alone for the moment.

Quote from: Melf Elf on June 16, 2006, 10:41:16 AM
Bought KOMG at 42.32.  Stop: 41.08, below this week's low.  Risk: a loss of 2.9%

Stopped out at 41.08 on the opening tank.  Loss: 2.9%.

Quote from: Melf Elf on June 23, 2006, 09:45:10 AM
Stopped out at 41.08 on the opening tank.  Loss: 2.9%.

That was a dirty trick last Friday morning, busting my stop by eight cents on the early swoosh down to 41.00, then closing it out at 42.00.

Curses!  >:D

After repeated failures, yesterday, KOMG finally closed decisively above its 50 DMA, and also closed above the neckline (blue) of its early 2006 H&S Top.

Quote from: nutsterrt on June 16, 2006, 02:25:39 PM
I've been watching this discussion from the shadows and have joined Melf on the long; purchased this AM, in at 42.25.

nutsterrt,

I hope you're still long.  ;)

Hanging in there, my friend  ;D I was willing to go down to 40 even. Glad I never hit it  :D

Quote from: nutsterrt on June 30, 2006, 09:42:43 AM
Hanging in there, my friend  ;D I was willing to go down to 40 even. Glad I never hit it  :D

nutsterrt,

Very good!  I'm glad that you're still in.  Applause.  ;D

Makes me feel better about getting shaken out it, after studying this chart for so long.  I should have "paid up," and gotten back in, but I was too irritated by that goofy swoosh to 41.00 at the open on June 23 that knocked me out of my long postition. 

It's a dirty trick to get punished for "Honoring Thy Stop" on a little fakeout. I HATE THAT.

  >:(  >:D

Enough of my whining (We need a Cry Baby face on the toolbar...oh, wait, there it is!)

:'(  :'(  :'(

At any rate, I'm real happy for you, buddy!  ;D  ;D  ;D

Good luck!  Hope you make lots of $$$

fyi:

Quote from: la-onda on July 27, 2006, 04:23:27 AM

Bear, Stearns & Co. Inc. Andrew Neff on KOMG

Komag, Inc. (KOMG-$41.57-Outperform)
Another Strong Quarter And Outlook Reflecting Healthy Trends; Unfounded Weakness Presents Buying Opportunity; Raising Ests
• ANOTHER STRONG UPSIDE. Reflecting a continued strong demand backdrop, capacity additions and new program ramps (mobile), Komag delivered its 8th consecutive upside. We're raising our Street-high ests and would use the stock's weakness as a buying opportunity.
• DEBUNKING STOCK'S WEAKNESS. We believe the stock was weak aftermarket on 3 main issues: 1) inventories, 2) ASP trends, and 3) margin guidance.
• 1) While inventories rose by 4% seq (on 12% rev growth), days inventory declined to 41 from 44 days, and concerns are overdone given the need to increase raw materials due to shortages, longer lead times and strong demand.
• 2) ASP was flat seq and slightly below ests given lower enterprise units (despite increase in high-cap drives), however ASP has shown remarkable stability and we expect it to remain roughly flattish over time given support from P.
• 3) While GM was weaker due to some inefficiencies as new equipment came online & programs ramped, and net margin guidance of 16-17% was more cautious, Komag has been conservative historically and some issues impacting margin should unwind in '07 (no expense from accelerated vesting).
• SOLID 2Q. KOMG reported 2Q06 EPS of $1.21, above our $1.17 est. (Street at $1.14), driven by stronger revs of $233.6mm (above guidance for $219-$229mm). ASP of $5.74 was lower than expected given less enterprise mix, while GM of 27.8% was below our 28.2% est.
• RAISING ESTS. We're raising post-option EPS for `06 from $4.85 to $4.90 and for `07 from $5.30 to $5.35. For 3Q06, we're lowering EPS from $1.25 to $1.24 on revs of $246mm (up 5% seq), at high end of guidance for 5% seq rev growth and EPS of $1.17-$1.24.
• MAINTAINING TARGET. We're maintaining our CY06 target of $65 using a 12x PIE on post-option `07 EPS. While investor tone on the call was fairly negative given aforementioned issues, we believe the concerns are overblown and growth opportunities remain (mobile, PMR, increases at WDC/Hitachi).
Another Strong Quarter And Outlook Reflecting Healthy Trends; Unfounded Weakness Presents Buying Opportunity. Reflecting a continued strong media demand environment, capacity additions, and new program ramps (2.5-inch/mobile), Komag delivered its 8th consecutive revenue/EPS upside. Despite the strong result and more favorable guidance relative to Street consensus (leading us to raise our Street-high estimates again), we believe the stock was weak in aftermarket trading owing to three potential issues: 1) further inventory increases (albeit slight), 2) ASP trends, and 3) margin guidance.
• Inventories: While continued growth of inventories by 4% sequentially (after 32% growth last quarter) may have been a point of contention, days inventory declined to 41 days from 44 days in the March quarter given 12% sequential revenue growth. Further, we believe that concerns on inventory growth are overdone given Komag's need to increase its raw material supply due to shortages, longer lead times, and the anticipation of continued strong customer demand in second-half 2006.
• ASP trends: ASP was flat sequentially and slightly below expectations, despite a large increase in higher-capacity drives at 120GB+, given a lower mix of enterprise units as Seagate ramps down Maxtor's acquired server business. However ASP has historically shown remarkable stability (which we expect to continue), and we expect it to remain roughly flattish over time given support from the ramp of higher-ASP perpendicular recording drives in 2007.
• Margin performance and outlook: Gross margin was weaker due to some unexpected factory inefficiencies as new equipment came online, new programs ramped and Komag saw some extra cost on the cross-qualification of products from the Seagate/Maxtor combination. While net margin guidance of 16%-17% for 3Q06 was viewed as more cautious, Komag has been conservative historically and some of the issues impacting margin should unwind in 2007, as Komag should begin to recoup factory efficiencies as new equipment is stalled and programs become ramped, and it no longer is faced with roughly $2 million per quarter in expenses related to accelerated stock options vesting.
Despite some investor anxiety on the HDD industry, Komag continues to benefit from a supply constrained environment (which is expected to continue into 2007) and remains a strong capacity expansion story. Further, we're encouraged about growth drivers from new ventures, including 2.5" aluminum-based notebooks (Komag already shipped a meaningful number to its first customer in 2Q06 and expects incremental volumes from a second customer by the end of 3Q06) as well as PMR for enterprise (volumes later in 2006). Moreover, Komag appears proactive in addressing the Seagate/Maxtor integration risk by offsetting with higher volumes to Western Digital and Hitachi.
• Collateral Impact: While Western Digital increased as a percentage of Komag's sales to 38% (from 35% in 1 Q06), implying some desktop share gain, Hitachi grew from 21% to 26% of sales, which suggests that it may have been the biggest beneficiary of the Seagate/Maxtor integration.
2Q06 EPS/Revenues Tops Expectations. Komag reported 2Q06 post-options EPS of $1.21 (vs. $0.86 a year ago), excluding a $21,000 gain from an asset disposal (which was immaterial to EPS) but including $1 million (or $0.03 per share) from options expense and $2.1 million from accelerated vesting expenses, which exceeded our $1.17 estimate, First Call of $1.14, and Komag's guidance of $1.14-$1.19 (reflecting a net margin of about 17%). Stronger-than-expected EPS was driven by revenue upside as well as lower-than-expected tax rate (added about $0.01), partially offset by lower gross margin.
• Revenues Above Guidance/Expectations. Revenues of $233.6 million (up 12% sequentially and 35% year/year) exceeded our estimate of $228.6 million, First Call consensus of $223.3 million and above Komag's guidance of a 5%-10% sequential increase (or about $219-$229 million).
• Upside In Finished Disk Revenues On Higher Units, Offset By Lower ASP Due To Mix. Finished disk revenues of $210.0 million were up 38% year/year and 15% sequentially and were ahead of our estimate of $201.9 million owing to better-than-expected shipments, somewhat offset by lower ASP. Finished disk units of 36.6 million were above our 34.9 million estimate, with capacity utilization again at 100%+.
• ASP Below Expectation On Mix Shift. Despite the increase in mix of 120+ GB/platter shipments, increased to 44% (or 16 million) from 24% of shipments (or 7.7 million units) during the prior quarter, ASP was about flat at $5.74, which was below our $5.78 estimate. Lower-than-expected ASP was due to decline
in much higher-ASP disks for enterprise drives owing to STX/MXO merger, which declined from 7% of shipments (or 2.2 million units) to 5% (or 1.7 million) sequentially, somewhat offset by increased shipments of higher capacity platters.
• Other Disk Revenue: Other disk revenues of $23.6 million were below our $26.8 million estimate and comprised 10% of sales.
• WDC/Hitachi Up, Seagate Down Sequentially. Owing to the completion of STX/MXO merger and the subsequent rationalization of MXO product line, shares of combined STX/MXO declined by 9% sequentially (or 19% year/year) from 39% of total revenues to 32%, or $74 million in revenues (or about 13 million units). KOMG noted that it expects STX/MXO share to increase sequentially in 3Q06 with MXO product rationalization behind it combined with STX/MXO volume commitments. On the other hand, sales to Western Digital rose 21% (or 169% year/year) sequentially to $88 million on estimated 13 million units, or 38% of sales, up from 35% during the prior quarter. In addition, Komag saw sales increasing to Hitachi by 37% sequentially (or 38% year/year) to $60 million (or estimated 8.5 million units).
• Lower Gross Margin On Lower Efficiencies. Despite full capacity utilization, gross margin of 27.8% was 39 basis points below our estimate of 28.2% and declined by 53 basis points sequentially (but about flat year/year) owing to some unexpected factory inefficiencies as new equipment came online, new programs ramped and Komag saw some extra cost on the cross-qualification of products from the STX/MXO combination..
• In-Line Operating Expenses. Total operating expenses of $25.2 million (including $1 million in stock-based compensation and $2.1 million in accelerated vesting of stock options and restricted stock related to previously announced CEO transition) were about in line with our estimate of $25.5 million. The company expects stock¬compensation-related expenses to remain at the current level of about $1 million and about $2 million associated with accelerated vesting of options (or $3.0 million in aggregate).
• Lower Tax Rate From Tax Holiday. Tax rate of 2.3% was below our 3.0% estimate, which added about $0.01 to EPS. The company reiterated its outlook for 2006 tax rate of 3.0% owing to the tax holidays in Malaysia, which do not expire until 2016.
• Balance Sheet Remains Strong, Days Inventory Improved. Total cash of $190 million was about flat sequentially, translating to cash per share of about $6.24 (net cash per share of $3.60 excluding convertible debt). While total inventory of $75 million grew about $3 million sequentially (or 4%), days inventory declined from 44 days to 41 days sequentially. Moreover, finished goods inventory of $7 million was up about $1 million sequentially and is about 1 week of sales. Majority of the inventory was raw materials, which increased by about $2 million, given the need to mitigate materials shortage concerns and to support production levels to meet continuing strong customer demand. DSO of 50 days decreased from last quarter's 52 days owing to higher revenues and the timing of customer payments.
Raising 2006 Estimates. Reflecting 2Q06 upside, coupled with continued media supply constraints and potential for growth from new applications (e.g., mobile), we are raising our estimates for 2006 and 2007. We are increasing our pro forma post-options EPS estimate for 2006 from $4.85 to $4.90 (which includes the impact of stock-based compensation expense of $3.7 million). Following assumptions were used to arrive at our EPS estimate:
• Revenues of $957 million, up 39% year/year but lowered from our previous estimate of $962 million due to
assumption of lower ASP from mix shift and lower revenues from substrates
• Finished disk units of 150 million, up 41% year/year and raised from our prior 148 million assumption
• ASP assumption of $5.71, lowered from our prior assumption of $5.75 due to mix shift
• Gross margin of 27.8%, lowered from 28.0% due to lower 2Q06
• Tax rate of 2.8%, lowered from our prior assumption of 2.9%
Lowering 3Q06 (September) Estimates. For 3Q06 (September), we are lowering our post-options EPS estimate from $1.25 to $1.24 (vs. $0.96 a year ago) on revenues of $246 million (up 37% year/year and 5% sequentially) on 39 million units (up 42% year/year and increased from our prior 38.8 million assumption), ASP of $5.70 (lowered from our prior $5.76 assumption) and gross margin of 27.6% (compared to our prior 27.9% assumption). Komag is forecasting revenues to grow 5% sequentially from the June quarter's $234 million (or about $245 million) and achieve a net margin about 16%-17%, implying an EPS range of about $1.17-$1.24 (including options expense).
Raising 2007 Estimates. For 2007, we are raising our post-options EPS from $5.30 to $5.35 (including the impact of stock-based compensation expense of $0.12) primarily on lower tax rate assumption. We assumed:
• Revenues of $1.08 billion, up 13% year/year and lowered from our previous estimate of $1.10 billion
• Finished disk units of 173 million, up 15% year/year and raised from our prior 169 million assumption
• ASP assumption of $5.67, lowered from our prior assumption of $5.77
• Gross margin of 27.4%, from 27.7%
• Tax rate of 3.0%, lowered from our prior 4.0% estimate
Valuation: Maintaining 2006 Year-end Price Target of $65. We are maintaining our 2006 price target from $62 to $65 by applying a 12x P/E multiple (slightly lowered from prior 12.3x target multiple to reflect the concerns about declining margins) on our post-option 2007 EPS. While investor tone on the call was fairly negative given concerns about increases in inventory, declining ASP, and lower margins, we believe Komag can navigate through these risks and growth opportunities remain (mobile, perpendicular recording, more volumes at Western Digital/Hitachi).
Raising 2006 Estimates. Reflecting 2Q06 upside, coupled with continued media supply constraints and potential for growth from new applications (e.g., mobile), we are raising our estimates for 2006 and 2007. We are increasing our pro forma post-options EPS estimate for 2006 from $4.85 to $4.90 (which includes the impact of stock-based compensation expense of $3.7 million). Following assumptions were used to arrive at our EPS estimate:
• Revenues of $957 million, up 39% year/year but lowered from our previous estimate of $962 million due to
assumption of lower ASP from mix shift and lower revenues from substrates
• Finished disk units of 150 million, up 41% year/year and raised from our prior 148 million assumption
• ASP assumption of $5.71, lowered from our prior assumption of $5.75 due to mix shift
• Gross margin of 27.8%, lowered from 28.0% due to lower 2Q06
• Tax rate of 2.8%, lowered from our prior assumption of 2.9%
Lowering 3Q06 (September) Estimates. For 3Q06 (September), we are lowering our post-options EPS estimate from $1.25 to $1.24 (vs. $0.96 a year ago) on revenues of $246 million (up 37% year/year and 5% sequentially) on 39 million units (up 42% year/year and increased from our prior 38.8 million assumption), ASP of $5.70 (lowered from our prior $5.76 assumption) and gross margin of 27.6% (compared to our prior 27.9% assumption). Komag is forecasting revenues to grow 5% sequentially from the June quarter's $234 million (or about $245 million) and achieve a net margin about 16%-17%, implying an EPS range of about $1.17-$1.24 (including options expense).
Raising 2007 Estimates. For 2007, we are raising our post-options EPS from $5.30 to $5.35 (including the impact of stock-based compensation expense of $0.12) primarily on lower tax rate assumption. We assumed:
• Revenues of $1.08 billion, up 13% year/year and lowered from our previous estimate of $1.10 billion
• Finished disk units of 173 million, up 15% year/year and raised from our prior 169 million assumption
• ASP assumption of $5.67, lowered from our prior assumption of $5.77
• Gross margin of 27.4%, from 27.7%
• Tax rate of 3.0%, lowered from our prior 4.0% estimate
Valuation: Maintaining 2006 Year-end Price Target of $65. We are maintaining our 2006 price target from $62 to $65 by applying a 12x P/E multiple (slightly lowered from prior 12.3x target multiple to reflect the concerns about declining margins) on our post-option 2007 EPS. While investor tone on the call was fairly negative given concerns about increases in inventory, declining ASP, and lower margins, we believe Komag can navigate through these risks and growth opportunities remain (mobile, perpendicular recording, more volumes at Western Digital/Hitachi).

I give a shit on the AMTECH Report, this is a more realistic analysis (from STX Yahoo board)
cheers
Oliver

Quote
Valuation: Maintaining 2006 Year-end Price Target of $65. We are maintaining our 2006 price target from $62 to $65 by applying a 12x P/E multiple.

this is a more realistic analysis (from STX Yahoo board)

Oliver,

That was quite a thorough analysis!  Based on the chart, though, that $62-$65 target is going to be difficult.

On the break of the H&S Top in April, Target: 34.02 was IN PLAY.  That went ON HOLD when KOMG recently regained the neckline, but that rally ended in a Bear Flag Bull Trap at 47.84, six cents above the Right Shoulder of the H&S Top, thus the Bull Trap.

The H&S Top target of 34.02 is back IN PLAY, as is the Bear Flag target (can't measure it on this chart).

That isn't to say that the Bear Sterns analysis wasn't good, or even that it won't be right, but it doesn't look like it will be as the chart stands, at new lows for the year.  The market is a discounting mechanism (rule of thumb is six months out), and there could be things that the analyst can't possibly know right now.

KOMG attempted a rally early this morning, but got stopped at first resistance, 39.16.  That was the June low at the 200 DMA.  The rally fizzled at 39.50, just above that resistance, and KOMG tanked $3, taking out yesterday's low.


The stock currently has recovered $1 back to UNCH, but rallies should be difficult after the recent breaks of technical support levels.

34.02 is IN PLAY from the April 21 break of the H&S Top.
34.53 is IN PLAY from the July 14 break of the Bear Flag.

Unless we see something bullish, KOMG is on track for 34.02 - 34.53

BUSINESS SUMMARY   
Komag, Incorporated engages in the design, manufacture, and marketing of thin-film media (disks) for incorporation into hard disk drives. These drives are used to record, store, retrieve, and protect digital information in personal computers, high-end server (enterprise) storage systems, communications infrastructure, and consumer electronics appliances. It also offers single-sided disks, aluminum substrate disks, plated disks, textured disks, and polished disks. The company's products offer a range of coercivities, glide height capabilities, and other parameters to meet specific customer requirements. Komag sells its products to original equipment manufacturers in the disk drive market worldwide. Komag was founded in 1983 and is headquartered in San Jose, California.

Im going to try this one tomorrow! Good pick like usual ;) you aiming for a cover target in the mid to high 20s?

Null,

Top Head & shoulders in the making,  looks like KOMG needs to go down more to connect the neckline.. IMHO ;)

More bearish chart for KOMG ;)

shorted some KOMG today  >:D.

I have bear claws again.  >:D  I'll take a short KOMG spin.

Quote from: Melf Elf on July 28, 2006, 11:02:06 AM
34.02 is IN PLAY from the April 21 break of the H&S Top.
34.53 is IN PLAY from the July 14 break of the Bear Flag.

Unless we see something bullish, KOMG is on track for 34.02 - 34.53

Target Zone 34.02 - 34.53 from the April and July pattern breaks MADE at the open.  Low was 34.26, right in the middle of the zone.

Quote from: Melf Elf on August 25, 2006, 02:48:57 PM
Target Zone 34.02 - 34.53 from the April and July pattern breaks MADE at the open.  Low was 34.26, right in the middle of the zone.

The low in KOMG so far is 34.17.

When targets get MADE, that doesn't necessarily mean that a stock isn't going any lower (or any higher, if it's a bullish target), but it's an area where a stock might get a least a bounce in the other direction, and it's a good idea to look for signs of that.

Since the July 27 earnings smash below 2006 support, at 39.16, KOMG has been trading in a Bullish Falling Wedge (pattern in green).  On August 21, the top of the pattern came in at 37.75.  The high that day was 37.7699, so that third hit gave us a trendline validation, suggesting that it might have some signifiicance if broken on the upside.

Yesterday, KOMG closed just a hair above the top of the Bullish Falling Wedge.  It wasn't a convincing breakout by any means, but it's a technical breakout nonetheless, and at least a caution for the shorts, to be on alert.   

The slope is -0.22444, so it comes in today at 35.731.

Quote from: Melf Elf on September 01, 2006, 06:03:12 AM
Yesterday, KOMG closed just a hair above the top of the Bullish Falling Wedge.  It wasn't a convincing breakout by any means, but it's a technical breakout nonetheless, and at least a caution for the shorts, to be on alert.   

Short squeeze at the open, after yesterday's technical breakout.

Quote
Since the July 27 earnings smash below 2006 support, at 39.16, KOMG has been trading in a Bullish Falling Wedge (pattern in green).

The short squeeze took KOMG to an early morning high of 39.30.

reason for squeeze:

Quote from: la-onda on September 01, 2006, 10:35:29 AM
Komag upgraded to "outperform"

Friday, September 01, 2006 5:57:35 AM ET
Robert W. Baird

NEW YORK, September 1 (newratings.com) - Analysts at Robert W Baird upgrade Komag Incorporated (KOMG.NAS) from "neutral" to "outperform." The target price is set to $50.

In a research note published this morning, the analysts mention that the upgrade in the rating is on account of a more optimistic 2H06 outlook. Komag has healthy prospects for gross margin improvement and revenues in 2007, with improved fixed cost absorption from new capital equipment, rising volumes and newer products, the analysts say. Robert W Baird believes that sustained high utilization and scheduled capacity expansion is likely to result in robust earnings going forward.

http://www.newratings.com/analyst_news/article_1358803.html

time for reentering???

reason for squeeze:

Quote from: la-onda on September 01, 2006, 10:35:29 AM
Komag upgraded to "outperform"

Friday, September 01, 2006 5:57:35 AM ET
Robert W. Baird

NEW YORK, September 1 (newratings.com) - Analysts at Robert W Baird upgrade Komag Incorporated (KOMG.NAS) from "neutral" to "outperform." The target price is set to $50.

In a research note published this morning, the analysts mention that the upgrade in the rating is on account of a more optimistic 2H06 outlook. Komag has healthy prospects for gross margin improvement and revenues in 2007, with improved fixed cost absorption from new capital equipment, rising volumes and newer products, the analysts say. Robert W Baird believes that sustained high utilization and scheduled capacity expansion is likely to result in robust earnings going forward.

http://www.newratings.com/analyst_news/article_1358803.html

time for reentering???

>:D >:D

Oliver,

Thanks for that information.    Interesting timing on that call, given yesterday's Bullish Falling Wedge breakout.  A "perfect storm," of sorts, with both the shorts and the breakout buyers clamoring to buy at the open.

I suspect that Baird, or someone in his office, was watching the Bullish Falling Wedge. 

The shorts could come under pressure again this afternoon if 38.22-38.23 gets taken out to the upside.

Quote from: Melf Elf on September 01, 2006, 12:25:14 PM
Short squeeze at the open, after yesterday's technical breakout.

Quote
Since the July 27 earnings smash below 2006 support, at 39.16, KOMG has been trading in a Bullish Falling Wedge (pattern in green).

The short squeeze took KOMG to an early morning high of 39.30.

Bear Stearns downgraded KOMG, and it's currently is down 15% on the heaviest volume of the year.

In my view, today's tank in the stock has nothing whatsoever to do with the fundamentals.  According to Scottrade, KOMG will earn $4.83 this year, and $4.93 next year, so the P/E ratio for both at today's price (currently 30.67) is less than 6.5.  Ridiculously low.

As I said to Joe in the APPL folder last night, let's put aside that we're talking about AAPL (KOMG, in this case), and look only at the chart.  What is it telling us?

Friday's Bullish Falling Wedge gap up breakout got to 39.16  RESISTANCE in the first 5-10 minutes of trading.  The high was 39.30, then the stock sold off.

Quote
The shorts could come under pressure again this afternoon if 38.22-38.23 gets taken out to the upside.

That didn't happen.  KOMG sold off, then gapped down yesterday, leaving a Bearish Abandoned Baby on the chart at 39.16 resistance.  UGH.

As we've discussed on so many threads, look at the overall chart.  We can see on this one that everyone who bought KOMG since January 11, 2006 had a loss in the stock when 39.16 broke to the downside.  That's 8-months worth of "overhead supply," of people who have a loss, and want OUT, thus the immediate selling on September 1, on the rally to 39.30.

More selling on the Abandoned Baby gap down yesterday.

Panic selling today, which again, I don't think has to do with the fundamentals, but rather, has everything to do with a technically-based selloff.

I don't like to advise anyone, but I will say that if you still own KOMG, this isn't some "fly by night" company that is going out of business.  There might be some more blood-letting as we go into the end of the year on tax loss selling, since everyone who bought KOMG in 2006 now has a loss and might realize it (sell) to offset gains in other stocks.  You might consider holding it, although again, I don't like to advise.

My point in this post isn't whether to hold KOMG, or not.  It's to point out that when stocks make big tops like this one did, use a stop.  Don't fight the trend, and don't let a loss become a disaster like this.

I sympathize with any of you who are long.  Days like this are miserable, but many of them can be avoided if we use a reasonble stop, and play something else that doesn't have 8-months worth of overhead resistance. 

Good luck!





 

Quote from: Terliso on August 09, 2006, 09:28:05 PM
Null,

Top Head & shoulders in the making,  looks like KOMG needs to go down more to connect the neckline.. IMHO ;)

KOMG is already down 17% this week

stopped out with 10% loss   :P :-\

Komag Drops On Weak Demand Outlook
Mary Crane, 09.06.06, 3:56 PM ET

Shares Komag were down more than 13% Wednesday after the disk-drive technology company lowered its third-quarter guidance on slower-than-expected demand and easing supply constraints.

In an 8-K filing with the U.S. Securities and Exchange Commission, Komag said it expects sequential revenue growth of 3% and net margins to be around 14% to 16%.

Komag had previously said it expects 5% growth and margins in the range of 16% to 17%.

"Current quarter-to-date demand has been slower than the normal seasonal pattern," Komag management said. "As a result, total shipments and financial results for the third quarter will be dependent upon the remainder of the quarter."

The announcement warranted a rating change from Bear Stearns to "peer perform" from "outperform." Analyst Andrew J. Neff said Komag's filing signaled a "worrisome change in tone" at the company and could be interpreted as a negative sign for hard-disk drive vendors like Seagate Technology or Western Digital, which are sensitive to capacity trends.

Caris & Co. analyst Shebly Seyrafi said increased competitive pressures, increasing capital expenditures, and declining capacity utilization will further erode Komag's margins.

The analyst lowered the price target on Komag to $35 from $40 and advised investors to avoid buying the stock.

Quote from: la-onda on September 07, 2006, 04:15:42 AM
stopped out with 10% loss   :P :-\

Oliver,

Sorry for your loss, my friend.  That's no fun, I know.

Quote
Komag Drops On Weak Demand Outlook
Mary Crane, 09.06.06, 3:56 PM ET

Shares Komag were down more than 13% Wednesday after the disk-drive technology company lowered its third-quarter guidance on slower-than-expected demand and easing supply constraints.

The analyst lowered the price target on Komag to $35 from $40 and advised investors to avoid buying the stock.

Thank you, and applause, for your posts on these upgrades and downgrades, and news items.  You've helped me out a number of times.

What helps me the most is not the actual target that the analyst gives, because those targets can be so disparate, like in April, but when they make the call .

Let's look at April, for example:

1. April 6, Needham called for a target of $65 based on 14 times 2006 estimate of 4.63 (which now is upped to 4.84, per Thompson Financial).

Good call, or not?  I'd have to say $65 looked entirely reasonable.

Timing of the call?  UGH...

KOMG had completed a Bearish Rising Wedge that had "morphed" into an upward sloping H&S Top (dotted red line, back in April).

KOMG had broken the neckline of the H&S top, and at that April 6 Needham call for $65, it failed just below the high of the Right Shoulder.  UGH.

2. April 24, Monday morning, AM TECH said sell, with a target of $29.

Good call, or not?  Based on the fundamentals, I'd say that they looked like idiots.  :D  >:D

Based on the chart that just had broken the neckline of a larger H&S Top at the close on Friday, April 21 that put a target of 34.02 IN PLAY, I'd have to say that the timing of the downgrade was brilliant, although the $29 target looked about $5 too low.  We now know that it wasn't too low.  We got to $30.18 yesterday.

3. April 27 - Kaufman Bros. downgraded KOMG.  I don't know what their target was.

Good call, or not?  Again, based on the fundamentals, the call doesn't look good.

Based on the chart?  The day before, April 26, KOMG re-tested and closed slightly above the neckline of the H&S Top.  Brilliant timing, to downgrade it right there at resistance.

4. September 1 - Barid upgraded KOMG.  I don't know their target.

Good call, or not?  Based on the fundamentals, it looks like a good call.

Based on the chart, brilliant timing.  KOMG had closed just a hair above the Bullish Falling Wedge on August 31.  The problem, as we know, was that the call resulted in an upside morning panic that failed at the bottom of 8 months worth of resistance, at 39.16  :(

Quote from: Melf Elf on September 01, 2006, 01:57:45 PM
Oliver,

Thanks for that information.    Interesting timing on that call, given yesterday's Bullish Falling Wedge breakout.   A "perfect storm," of sorts, with both the shorts and the breakout buyers clamoring to buy at the open.

I suspect that Baird, or someone in his office, was watching the Bullish Falling Wedge. 

I see that happen so often that I have to conclude that, in this day and age of computers and charting, these analysts know exactly where the breakout/breakdown data points are, and I suspect them of front-running their upgrades and downgrades.

Not accusing...just suspecting...  :D

Very easy for the analysts to buy the breakout on Thursday afternoon, then the next morning, "Melf Elf Upgraded KOMG to $40." (Then sell into the rally, at $39 resistance).   :D  >:D

In terms of Needham's $65 call vs. AM Tech's $29 back in April, if we look at the chart and the patterns, I think we'd have to agree, especially given the timing of AM Tech's call, exactly at the break of the H&S Top, that in this case, AM Tech's technicals trumped Needham's fundamentals.  It doesn't always work that way, but I think that we can take advantage of some of these calls.

Thanks again for all of your news alerts, Oliver.

thanks MelfElf, also applaud for your fantastic analysis (always appreciated)

update:
Citigroup Smith Barney is reiterating BUY on KOMG citing Q3 Hiccup Creates Trading Opportunity

September 7, 2006

SUMMARY

- Komag lowered its Q3 revenue and op margin guidance. The company now expects revenues to be up 0-3% Q/Q compared with up to 5% previously, with op margins of 14-16% down from 16-17%.

- Mgmt cited a weak July/Aug., leaving the quarter more back-end loaded than recent years. Compounding the demand issue was excess OEM inventory exiting June and a slower ramp on large-capacity drives (>120GB). We believe the latter of these will be substantially worked though via seasonal Q4 demand.

- From an HDD industry standpoint, the KOMG miss represents <1% of our CQ3 HDD TAM (ex-notebook). As such, premature to make a macro call on demand. However, moderation of Capex is a modest neg. for IVAC and XRTX.

- On the back of recent sell-off, valuation looks attractive and downside risk appears limited. Assuming a reduced multiple (8x v. 10x) and lowered NTM EPS ($4.78 v. $5.00) our new $40 price target offers a 28% ETR. Maintain Buy.

update  8)

Sector Wrap: Komag Drags Disk Drive Makers
Friday September 8, 1:24 pm ET
By Betsy Schiffman, AP Business Writer
Hard Disk Drive Makers Dragged Down After Komag Cuts Sales Outlook

NEW YORK (AP) -- Komag Inc. delivered a little blow on Wednesday morning that didn't bode well for hard disk drive makers.

The San Jose, Calif.-based company, which makes computer disks used for disk drives, said it expected third-quarter sales to fall short of previous expectations due to weak demand. The company now expects between $233.6 million and $240.6 million in sales, down from a previous forecast for roughly $245.3 million in sales, prompting investors to dump the stock. On Wednesday shares of Komag opened at $33.10, down 9 percent from the previous close of $36.26, and the stock lost nearly 18 percent on the week, closing Thursday at $31.10.

Some analysts suspected Komag's misfortune was indicative of softening business for hard disk drive makers as well.

"Komag is a key media supplier to the disk drive space," said Caris & Co analyst Shebly Seyrafi. "Their key customers include Seagate, Western Digital and Hitachi. This is a negative point for drives or PCs. And although there's a possibility that PC sales will pick up later this year, so far we haven't seen a significant pick up."

Still, other analysts left room for the possibility that Komag's problems were company specific.

"The stock market is taking the view this morning that this announcement has negative implications for finished hard disk drive demand at Seagate Technology (a Cayman Islands headquartered maker of hard disk drives) and Western Digital Corp., which is possible, although there are other puts and takes to consider," wrote Merrill Lynch analyst Steven Fox, in a note to clients on Wednesday.

Baird analyst Daniel J. Renouard was less worried, and even a touch bullish on the disk drive makers.

"Given some forward buying of media occurred during the second quarter, the slow start to the September quarter likely led to a slight workdown in media with a magnified impact to Komag. We suspect end demand is healthier going forward than either Western Digital or Seagate Technology valuations imply and we recommend purchase of both stocks at current levels," Renouard wrote in a note to clients.

Investors had their own ideas, though. Shares of Seagate fell 11 percent during the week to end Thursday at $20.06 on the New York Stock Exchange. Meanwhile, shares of Western Digital took an even bigger hit. The stock lost 13 percent on the week, finishing at $16.43 on Thursday on the NYSE.

Quote from: la-onda on September 08, 2006, 02:16:14 PM
"Given some forward buying of media occurred during the second quarter, the slow start to the September quarter likely led to a slight workdown in media with a magnified impact to Komag. We suspect end demand is healthier going forward than either Western Digital or Seagate Technology valuations imply and we we recommend purchase of both stocks at current levels," Renouard wrote in a note to clients.

Investors had their own ideas, though.  Shares of Seagate fell 11 percent during the week to end Thursday at $20.06 on the New York Stock Exchange. Meanwhile, shares of Western Digital took an even bigger hit. The stock lost 13 percent on the week, finishing at $16.43 on Thursday on the NYSE.

Oliver,

I think that shareholders are catching on: do the opposite   of what the analysts say!  ;D  >:D

Just kidding, of course, but there's a bit of truth in that jest.  There have been some good analyst calls, like the Am Tech and Kaufman Bros. downgrades of KOMG in latr April, 2006 at the broken neckline of the H&S Top, but Needham's call back then for $65 in KOMG was way off.

Here are some other analyst calls that make me wonder:  ???

1. Piper Jaffray reiterated OUTPERFORM on STX on August 29, 2005 exactly at a re-test of a broken H&S Top!

STX tanked for the next two months.  Overall, it was a good call, but lousy timing.

2. On October 12, 2005, Needham (they're the ones who put $65 on KOMG) cut STX from $28 to $21.  Two weeks later, STX bottomed, then rallied to $28!

We have to watch Needham.  Whatever call they make on the disc drive makers, we're doing the opposite.  ;D

3. Next day, October 13, 2005, JP Morgan downgraded STX on concerns about the entire sector.  STX bottomed two weeks later, then rallied more than 100% to $28 over the next four months!

I certainly can see how difficult it is to "predict the future," which is why I never attempt it,  ;) but a lot of these calls are way, way-y-y off the mark, aren't they?  As a result, I don't have much faith in the numbers that these guys put out.  As I said in my last post, the timing of the calls is more interesting to me, like the examples above, and the examples in the KOMG chart.

I'll post you an updated chart of STX in that folder, in case you're interested.

yahoo board quotation:
While the modest downward revision in Komag's revenue forecast for this quarter was disappointing, once again IMHO I believe the market over reacted to the news. While some have tried to assert that this announcement marked the beggining of a downward slide for Komag, there were several factors that were behind the revision.

1. STX ended the quarter with almost $90 million in excess finished goods inventory, thereby lowering the number of components required by Seagate this quarter.
2. It is believed that other customers may have over stocked their media inventories during the June quarter.
3. Samsung, which is not CURRENTLY a Komag customer, increased its share of the desktop market in the June quarter from 11% to 15%.

Now the doom and gloomsters are repeating the same old, same old hand waving arguments about Seagate & HGST cutting back future orders. Yet, they fail to mention the following:

1. At the current projected 15% CAGR for media ships thru 2010, STX will purchase 14 to 15 million disks externally in 2008 even after they get their new Woodlands 3 facility up. Last quarter, STX & MXO combined bought 12.6 million disks from Komag.
2. Many investors believe Kmoag will add Samsung as a new customer in the coming months. IMHO, sales to Samsung could account for 3 to 4 million disks/qtr by mid-07, which represents a 7% to 10% inrcease in unit ships over current levels.
3. Shipments of media on 65mm Al/NiP substrates is expected to grow next year and could contribute 3% to 5% to increased disk ships.
4. Vista launch should be a plus for PC/Drive/Media ships in 2007.

Now the naysayers have also been constantly whining over increased depreciation expenses for Komag in 2007, yet they fail to note:

1. Komag will not be increasing capacity in 1H07. This year, Komag's capital spending was an all time high of $300 million.
2. Komag will lower R&D costs in 2007 as perpendicular media quals and ramps production.
3. Komag is spending big $$$ for perpendicular and other new program quals at the moment, the number of new program quals should significantly drop in 07.
4. Komag expects a richer overall product mix in 2007.
5. As perpendicular and 65 mm media on Al/NiP ramps, yields & margins will improve.

Finally, the con arists are still trying to alarm people that the number of platters per drive will significantly drop in 07 due to higher areal densities afforded by perpendicular recording.

1. No one, including STX, sees a drop in the number of platters-per-drive in 2007.
2. As the % of consumer drive ships realtive to total ships increases, platter count actually goes up!


Analyst Conference presentation:
http://www.komag.com/investors/presentations/Citi_Sep06.pdf

Quote from: la-onda on September 13, 2006, 04:00:26 AM
yahoo board quotation:

Oliver,

The poster sounds very knowledge and intelligent.  However, he seems a bit locked into the idea that the market always should make sense, that stocks should trade in tandem with the fundamentals, and if they don't, the market is wrong.  That can be costly.

Let's look at this statement:

Quote
Now the doom and gloomsters are repeating the same old, same old

And, at this statement:

Quote
Now the naysayers have also been constantly whining

And, at this one:

Quote
the con arists are still trying to alarm people

Whew!  :o

The poster seems to write with a bit of prejudice, and seems to lack objectivity.  What if. prior to earnings, another poster had written that they thought KOMG might disappoint somewhat, and that if the market didn't react well, and broke support, KOMG was a sell? 

I suspect that he'd call them a "naysayer," or a "doom and gloomer," but here's the reality:

Quote
the modest downward revision in Komag's revenue forecast for this quarter was disappointing

The market doesn't like disappoints, even modest ones.  We know that.

We can disagree all we want to with the market's reaction, but when KOMG gapped down to 42.50 before earnings, breaking the Bear Flag, then broke 41.54 support, then broke 39.17 support...UGH...it was a sell.

That's why I say that it can be very costly if we get stuck in our opinion that we're right, and that the market's reaction is wrong.  Because of that, this poster had almost no chance of selling the breaks of support in the mid to low 40s, and at 39.17, and saving himself a paper loss of 20-30%.

No offense to the guy intended,  but I'd suggest something like:

"Here's my analysis.  I think KOMG is a great company, but if the market doesn't agree with me at this point in time, and if support breaks, I'll sell it and happily buy it back at a nice 20-30% discount."

Just my opinion, of course.

Quote

KOMG broke out of a Symmetrical Triangle a couple of hours ago, on a print of 33.86, and ten minutes ago, printed 34.12, the high of the day, so far.  The high at Data Point #4 was 34.11, so that's a "higher high."

38.49 is IN PLAY as long as KOMG holds the breakout.

Targets against the trend are less likely to get MADE. 

I've created a parallel line with the same upward slope as the trendline connecting the lows at #1 and #3, and attached it to the high at #2.  This could morph into a Bear Flag, if KOMG fails there. 

If it gets through that upper trendline, the target would have a better chance of getting MADE.

KOMG currently is BID 34.00...ASK 34.01, fourteen cents above the breakout.

EDIT: Suggested Stop: Below yesterday's low of 32.45.  If that gets taken out... :P
Risk is a loss of about 5%

Another pattern breakout in KOMG this morning.

Ascending Triangle (in blue).  Target: 36.83 is IN PLAY, as long as KOMG trades above 34.11.

This target doesn't add anything to last week's Symmetrical Triangle breakout target of 38.49, but multiple breakouts are good to see.

KOMG currently is BID 34.34...ASK 34.35

KOMG has printed 34.83, a penny above the high of the Symmetrical Triangle (see daily chart above), so that's a minor target that MADE, and that high has been taken out to the upside.

So far, so good.

Quote from: Melf Elf on October 16, 2006, 10:09:42 AM
Another pattern breakout in KOMG this morning.

Nice candle for KOMG, following through to the upside on yesterday's Ascending Triangle breakout above 34.11-34.12.

The top of a "possible' Bear Channel (thin green line) comes in today at 36.03, and rises 0.06368 per day.  If we get there, I'll take some off the table to defend against a bearish pattern morph.

I don't expect that, given the two bullish pattern breakouts, but you never know.  :o  ;D

Nice Melf,

KOMG really kicked off in the last hour or so yesterday.  A solid long candle like this certainly does bode well for KOMG.  I was tempted yesterday after reading your analysis, but it seemed to be hanging a bit around 34.82 resistance, and I made my play for the day yesterday, garnering 2 points off NVEC (quite happy about that one - sold at 34.40 ;D).

Personally I think KOMG could easily have legs for $40 now, it might just take a little while - looks to be shaping up niceley though, so good luck (ah no such thing ;)) to ya!!

Quote from: ScottishTrader on October 17, 2006, 08:46:45 AM
Personally I think KOMG could easily have legs for $40 now, it might just take a little while - looks to be shaping up niceley though, so good luck (ah no such thing ;)) to ya!!

Thanks, Scotsman!  ;)

KOMG got slapped yesterday, along with just about everything else.  On any further selloff, I would expect it to hold at QUADRUPLE 33.53 - 33.59 support:

33.59 - is where the top of the Symmetrical Triangle comes in today

33.53 - is the 22-Day Tenken-sen (solid red line) today

33.53 - is the bottom of the Kumo (Cloud) today

33.53 - is where the up trendline of the Ascending Triangle comes in today

Those will change a little each day, but right around there.  The upside targets still are IN PLAY, as long as KOMG holds the breakouts:

34.10 - The Ascending Triangle (36.83 is IN PLAY)

33.59 - The Top of the Symmetrical Triangle (38.49 is IN PLAY)

Survived a test of the ascending line yesterday, then closed near its high of the day. 

Targets: 36.83 and 38.49 still are IN PLAY.

Sold KOMG at 34.05.  Gain: ½%

Quote from: Melf Elf on October 20, 2006, 09:19:48 AM
Survived a test of the ascending line yesterday, then closed near its high of the day. 

Broke the Ascending line today, and closed near its low.  :

It still might be okay, but I don't like that. P

nice Q3 news  >:D

Komag Reports Third Quarter of 2006 Financial Results
Wednesday October 25, 4:00 pm ET

SAN JOSE, Calif., Oct. 25 /PRNewswire-FirstCall/ -- Komag, Incorporated (Nasdaq: KOMG - News), a leading independent supplier of thin-film media for disk drives, today announced record revenue of $239.6 million and diluted earnings per share of $1.04, for the third quarter of 2006. These financial results represent a 33% increase in revenue and a 7% increase in diluted earnings per share over the same period last year.

Revenue and diluted earnings per share for the nine month period ended October 1, 2006 were $681.7 million and $3.35, respectively, a 38% increase in revenue and a 35% increase in diluted earnings per share for the nine months ended October 1, 2006 compared to the same nine month period of the prior year.

Tim Harris, Komag's Chief Executive Officer stated, "Overall market demand for our products has continued to increase and we reached another record quarter of revenue in the third quarter of 2006, as well as another solid quarter of earnings. This is the ninth consecutive quarter of increasing revenue for Komag. Our third quarter net income was impacted by a slower shipment rate than expected early in the quarter and compensation related expenses for executive retirements."

"In the third quarter of 2006, we continued to achieve strong manufacturing performance while qualifying and ramping new products. Further, we are very pleased to have completed qualification and began initial shipments to a new customer," said Mr. Harris.

Net income and diluted earnings per share for the third quarter of 2006 and the nine-month period ended October 1, 2006 includes compensation charges (primarily non-cash stock compensation) of $2.9 million and $6.0 million, respectively, related to the retirement of certain executive officers.

Third Quarter Review

Sales to Seagate, Western Digital and Hitachi Global Storage Technologies accounted for 38%, 34% and 24% of total revenue in the third quarter of 2006, respectively. Total finished disk shipments were 38.1 million in the third quarter of 2006.

High capacity 3.5-inch advanced disks at storage capacities of 160GB represented approximately 33% of total finished disk shipments in the third quarter of 2006. Shipments of 120GB and greater disks represented approximately 54% of Komag's total finished disk shipments in the third quarter of 2006. These disks are primarily targeted for high capacity desktop and multi-platter consumer applications. These rapidly growing consumer applications include personal video recorders (PVRs), digital video recorders (DVRs), high definition television (HDTV), external storage, gaming and other home entertainment devices.

Other revenue, which includes sales of aluminum substrates, nickel-plated polished aluminum substrates and textured substrates, accounted for 10% of total revenue in the third quarter of 2006. Komag is the world's largest hard disk aluminum substrate manufacturer. While substrates are primarily produced for internal use in the manufacture of finished disks, the high quality of Komag's substrates has led to continuing market opportunities to sell substrates externally to strategic customers.

Business Outlook

"Komag is currently qualified and shipping new perpendicular magnetic recording (PMR) media for 3.5-inch disk drives. We expect significant PMR media shipments in the fourth quarter of 2006 and further expect that shipments will continue to increase over the course of 2007. In addition to our development activities on 95mm PMR media products, we are also working on advanced PMR product designs for 65mm aluminum and glass products for shipment during 2007.

Current overall expectations for the fourth quarter of 2006 are that demand for our products remains strong and our factories are expected to run at near to full manufacturing capacity. Based on current demand, we expect that total revenue in the fourth quarter of 2006 could increase up to 5% from the record third quarter level. We further expect that an aggressive product transition will continue, including the ramping of our PMR products. Based on our expected revenue and support for the new advanced product transitions, net margin is expected to be in the range of 15% to 17% in the fourth quarter of 2006.

During the fourth quarter of 2006, we expect to maintain our finished media capacity at approximately 40 million disks per quarter. This is below our previously expected year end exit rate of 43 million disks per quarter. We maintain close coordination with our customers and currently believe that 40 million disks is the appropriate level of capacity to meet customer demand and achieve near full capacity utilization for the fourth quarter.

Komag is committed to supporting the growing demand for digital storage by maintaining our high quality, low cost manufacturing structure, providing advanced technology products, excellent customer support and providing rational capacity in conjunction with strategic supply agreements with our customers, with the goals of growing our business and providing financial returns to our stockholders," said Mr. Harris.



detailed presentation:

http://www.komag.com/investors/presentations/KOMG3Q06_Oct06.pdf

Quote from: la-onda on October 25, 2006, 04:12:31 PM
nice Q3 news  >:D

Oliver,

My original stop below 32.45 (the low of the Symmetrical Triangle pattern, in green...and the "last low" of the little Ascending Triangle pattern, in blue) would have been fine, but I got out ahead of earnings on the October 20 close of the Ascending line.

Earnings look good. The pattern targets of 36.83 and 38.49 still are IN PLAY.

Good luck, if you have it!  ;)

thanks MelfElf

fyi:
1)
Citigroup Investment Research Morning Note:
10-26-06
"Industry Woes Weigh on 2H06 But 1H07 Remains Promising"
While over the near-term Komag doesn't appear capable of escaping the gravitational field associated with be broader industry's challenges (inventory, pricing), we continue to
recommend it as the lone Buy in our HDD coverage group. The basis for our recommendation has been rooted in what we saw as an under-appreciated opportunity for incremental unit volumes associated with the Seagate/Maxtor transition, coupled with the company's expanding product and customer set. Although this was insufficient to offset the finished goods inventory build throughout the industry over the last 4-5 months, as this dynamic works through during the December quarter we expect reacceleration to commence during the first half. Intersecting with lowered capital spending and accelerated timing on new program ramps, we look for attractive fundamental improvement. This potential, coupled with the shares current 7x P/E multiple, has us looking past the near-term while maintaining our Buy rating and $40 price target.

2)
Komag "outperform," target price reduced
Thursday, October 26, 2006 6:16:41 AM ET
Robert W. Baird
NEW YORK, October 26 (newratings.com) - Analysts at Robert W Baird maintain their "outperform" rating on Komag Incorporated (KOMG.NAS), while reducing their estimates for the company. The target price has been reduced from $50 to $48.
In a research note published this morning, the analysts mention that the company has reported its previous quarter's EPS short of the estimates and the consensus. Komag has announced Samsung as its new customer, which the analysts view as significantly positive, the analysts add. The EPS estimates for 2006 and 2007 have been reduced from $4.55 to $4.52 and from $5.00 to $4.75, respectively.

nice start in the morning, if you are invested  8)

(I am not  :'( )

fyi:
KOMAG INC. (KOMG.O: Quote, Profile, Research)

Current Prior Rating Outperform Peer Perform

--Bear Stearns cited potential positives from adding a new customer Samsung, new product expansion, favorable margin impact from slowing capacity additions, favorable pricing trends in 2007 and the stock's low valuation.


--Shares of the maker of computer disk drive components were up 6.05 percent at $37.58 in late morning trade on the Nasdaq. (Reporting by Hari Kumar in Bangalore)

fyi:
Komag upgraded to "buy"
Monday, October 30, 2006 9:12:05 AM ET
Deutsche Securities
NEW YORK, October 30 (newratings.com) - Analysts at Deutsche Bank Securities upgrade Komag Inc (KOMG.NAS) from "hold" to "buy."

shorts update:
http://www.shortsqueeze.com/index.php?symbol=komg&submit=Enter

Quote from: la-onda on October 31, 2006, 02:21:42 AM
fyi:
Komag upgraded to "buy"

Oliver,

The October 11 Symmetrical Triangle breakout target of 38.49 MADE yesterday,  on Deutsche Bank's  upgrade.  The  high was 38.51 .

I sold it ahead of earnings.  :P 

Wasn't yesterday Devil's Night?  :D  >:D  >:D  >:D

-
Komag initiated with "neutral"
Tuesday, November 21, 2006 11:21:00 AM ET
Goldman Sachs
NEW YORK, November 21 (newratings.com) - Analysts at Goldman Sachs initiate coverage of Komag Inc (KOMG.NAS) with a "neutral" rating.

-
UBS conference presentation:
http://www.komag.com/investors/presentations/UBS_Nov06.pdf

-
chart:

update:
8:02AM Komag: Tracking to solid 4Q, outlook encouraging for 2007 - Needham (KOMG) 38.28 : Needham states that recent industry checks continue to suggest that KOMG is tracking to a solid 4Q. While drive demand was decent in Oct, volume improved meaningfully in Nov, and has remained robust thus far in Dec. They believe that pulls have been particularly strong from WDC and of perpendicular platters by STX. Firm notes that overall, with the supply/demand dynamics in balance, strong cash flow on the horizon, potential upside drivers emerging (Vista, glass entrance, Samsung), and a compelling valuation of just 8x, they continue to believe that KOMG is a core holding for those seeking to participate in the growth opportunity in HDDs, noting that with pricing and mix tracking to expectations, margins should tick up slightly sequentially.
Reiterates Strong Buy and $49 tgt.

Michael,
KOMG stillon your watchlist?

what a change  ::)

1)
Komag downgraded to "peer perform"
Friday, May 25, 2007 9:45:01 AM ET
Bear Stearns
NEW YORK, May 25 (newratings.com) - Analysts at Bear Stearns downgrade Komag (KOMG.NAS) from "outperform" to "peer perform."
2)
Komag "outperform," target price reduced
Friday, May 25, 2007 3:06:21 AM ET
Robert W. Baird
NEW YORK, May 25 (newratings.com) - Analysts at Robert W Baird maintain their "outperform" rating on Komag Incorporated (KOMG.NAS), while reducing their estimates for the company. The target price has been reduced from $39 to $31. In a research note published yesterday, the analysts mention that the company has issued a revenue and EPS warning for 2Q07. This reflects weak unit demand and pricing pressure from OEM customers, coupled with sub-optimal factory utilization and already high opex levels at Komag due to new programme design initiatives, the analysts say. The EPS estimates for 2007 and 2008 have been reduced from $3.60 to $2.70 and from $4.00 to $3.15, respectively.
3)
Komag "hold," target price reduced - update
Friday, May 25, 2007 2:01:57 AM ET
Brean Murray, Carret & Co
NEW YORK, May 25 (newratings.com) - Analysts at Brean Murray maintain their "hold" rating on Komag Inc (KOMG.NAS), while reducing their estimates for the company. The target price has been reduced from $34 to $30. In a research note published yesterday, the analysts mention that the company has reduced its revenue and operating result guidance for the June quarter citing market pressures on pricing and volumes and challenges of the perpendicular media ramp. The EPS estimates for 2007 and 2008 have been reduced from $3.62 to $2.70 and from $4.26 to $3.05, respectively.
4)
Komag "neutral weight," target price reduced - update
Friday, May 25, 2007 1:58:49 AM ET
Prudential Financial
NEW YORK, May 25 (newratings.com) - Analyst Jesse Tortora of Prudential Financial maintains her "neutral weight" rating on Komag Inc (KOMG.NAS). The target price has been reduced from $31 to $28. In a research note published yesterday, the analyst mentions that the company has reduced its revenue and operating guidance for the June quarter. Komag has indicated that its unit volumes and ASPs are under pressure. HDD demand is slowing and the company's margins are under pressure due to several factors, including capacity underutilization, rising depreciation expenses, currency impacts and lower margin substrate sales, the analyst says.

KOMG: AG Edwards Starts @ Hold; Analyst Notes
Friday , June 22, 2007 11:11ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  A.G. Edwards Inc.
Ratings Action: INITIATE
Current Rating: Hold
Analyst Comments: Despite a tempting valuation and the belief that most of the negative news is now known, the firm is initiating coverage on shares of Komag with a Hold rating as they believe execution-related risks and a longer-term reduction in disks/drive ratios will keep shares range bound. They are initiating coverage with below consensus estimates with C2007 and C2008 Rev/EPS at $960.1M/$2.63 and $989.8M/$2.83.

&

KOMG: Craig-Hallum Ups to Buy from Accumulate; Sets Tgt @ $38
Tuesday , June 26, 2007 11:47ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  Craig-Hallum Capital Group LLC
Ratings Action: UPGRADE
Current Rating: Buy (from Accumulate)
Target Price Action: INITIATE
Target Price: $38.00

&

June presentation:
http://www.komag.com/investors/presentations/KOMG1Q07_Jun07.pdf

chart:

Mike, we have to look for another investment opportunity  8)
cheers
O.

KOMG: Expects Q2 Revenue Down At Least 30% Compared to Q1
Thursday , June 28, 2007 19:06ET

Komag, Incorporated (KOMG) updated its business outlook for Q2 of 2007. The Company currently expects revenue for the second quarter of 2007 to be down at least 30% as compared to the first quarter of 2007. Due to the significant reduction in revenue, the Company also expects to incur a substantial operating loss in the second quarter of 2007.

&

WDC: To Acquire Komag for Apporx $1B
Thursday , June 28, 2007 19:05ET

Western Digital Corporation (WDC), and Komag, Incorporated (KOMG) announced that the two companies have entered into a definitive agreement for WD to acquire Komag for $32.25 in cash per share for a value of approximately $1 billion.

The transaction will be structured as a cash tender offer for all the outstanding shares of Komag common stock, followed by a merger of a wholly-owned subsidiary of WD into Komag in which the remaining shareholders of Komag will receive $32.25 in cash.

The transaction has been unanimously approved by the board of directors of each company and is subject to customary closing conditions, including regulatory approvals, and is expected to close in the third calendar quarter of 2007.

&

Analyst sees unusual call trades before Komag deal
Thu Jun 28, 2007 7:58 PM ET

By Doris Frankel

CHICAGO, June 28 (Reuters) - Unusual trading in options positions that would benefit from a rise in Komag <KOMG.O> shares, placed before the disk-drive component maker put itself on the block, looked "suspicious," an options analyst said on Thursday.

Western Digital Corp. <WDC.N> has agreed to acquire Komag Inc., one of its last rivals in the U.S. hard disk drive industry, for about $1 billion in cash, the companies said on Thursday. Western Digital would pay $32.25 a share for all outstanding shares of Komag.

"I would say this unusual spike in call trading before the deal is suspicious," said Joe Sunderman, vice president of research and development at Schaeffer's Investment Research in Cincinnati, Ohio.

The U.S. Securities and Exchange Commission declined to comment on the surge in call option volume ahead of Thursday's announcement, which came after the close.

In several instances this week, the volume in Komag calls, granting investors the right to buy its stock at a given price and time, stood out dramatically, Schaeffer's data showed.

From June 25 through June 27, call volume on the front three months of June, July and September averaged 12,123 contracts, far outpacing Komag's average daily call turnover of 887 contracts for the entire year, Sunderman said.

That is nearly 14 times ordinary volume over the last few days in comparison to the rest of the year, he said.

Even on Thursday, Komag options were unusually busy as 6,736 calls vs. 4,488 puts crossed the tape, according to market research firm Track Data.

Particularly notable were the July calls allowing investors to buy Komag shares at $30 a piece within a few weeks, Sunderman said.

The July $30 calls traded 1,667 times compared to 5,374 contracts outstanding and cost $1.10, up 5 cents on Thursday.

Komag shares rose 49 cents to finish at $29.58. These calls with strike prices slightly higher than the market price would give an investor a chance to profit if the share price rises.

Indeed, Komag stock rose 7.6 percent in after-hours trade to $31.83, while Western Digital dipped 2 percent in extended trade to $19.15.

"Those options would be in-the-money if the shares rise to $32.25, the takeover price by July expiration," Sunderman added.

According to Options Clearing Corp, 14,783 Komag options traded on Wednesday, out of which 87 percent were calls. On Tuesday, 18,409 contracts crossed the tape and 88 percent of that volume were calls and on Monday, 23,026 contracts changed hands, out of which 83 percent were calls.

"Additionally. the technical price trend in Komag has been very poor, and in spite of this, the call activity on a laggard such as Komag is unusual," Sunderman said.

Komag shares have shed 22 percent in value since the start of this year.

It can be hard to pin down whether questionable trading in a target company's options stems from insider information, because it can result from pure speculation as a result of rumors or just plain luck.

KOMG: Caris & Co Ups to Average from Below Average; Analyst Notes

Friday , June 29, 2007 10:46ET
Issuer: Komag Inc (NasdaqNM: KOMG)
Analyst Firm:  Caris & Company
Ratings Action: UPGRADE
Current Rating: Average (from Below Average)
Analyst Comments: The firm is upgrading KOMG as it has value to a strategic buyer like WDC. KOMG is facing a fundamental deterioration in its business and on fundamentals is only worth $23 but to a strategic buyer could be worth $32. WDC expects the deal to increase its OIM by 100bp over time.


Komag downgraded to "neutral"

Friday, June 29, 2007 3:26:11 AM ET
Robert W. Baird

NEW YORK, June 29 (newratings.com) - Analysts at Robert W Baird downgrade Komag Incorporated (KOMG.NAS) from "outperform" to "neutral," while reducing their estimates for the company. The target price has been raised from $31 to $32.

In a research note published this morning, the analysts mention that the company has accepted Western Digital's acquisition bid of $32.25 per share, and another bidder is unlikely to step in. Komag has guided to a q/q decline of at least 30% in its F2Q revenues. This guidance reflects weak industry trends and a possible withdrawal of STX orders, Robert W Baird adds. The EPS estimate for 2007 has been reduced from $2.70 to $0.99.

"KOMG" Threads have been Merged.
Please use the search before starting new threads on a Stock Pick.
Chances are a thread already exist.
So why not post whatever you have to comment about on that pick to that thread.
"Simplicity" My fellow traders.    ;D                   
All history on a stock pick in 1 thread is awesome.   ;)                   
Just trying to get threads together,so we don't have a numerous amount floating around on the same stock.   :( ::)   
Thank You....and good luck with all your trades....make some $$$   ;) ;D