SILC

[la-onda]

 
Silicom Delivers Record Revenues for Q1 2008
Monday , April 28, 2008 08:14ET

KFAR SAVA, Israel, Apr 28, 2008 (BUSINESS WIRE) -- Silicom Ltd. (NASDAQ:SILC)(TASE:SILC) today reported its financial results for the first quarter ended March 31, 2008.

Revenues for the first quarter of 2008 reached a record $7.7 million, an increase of 27% compared with $6.0 million recorded in the first quarter of 2007.

Net income for the period increased by 39% to $1.7 million, or $0.26 per share (basic and diluted), compared with $1.2 million, or $0.22 per diluted share ($0.23 per basic share), for the first quarter of 2007.

As of the end of the first quarter, the Company's cash, cash equivalents and marketable securities totaled $35.1 million, an increase of $2.2 million compared with the end of 2007.

Commenting on the results, Shaike Orbach, President and CEO, said, "We are pleased to report another quarter of record revenues and sequential revenue growth, especially in a market environment that has entered a period of slowdown. Despite the current uncertainty, we continue to see many opportunities in our target markets that we are well-positioned to address. During the past year, we built our business to a new level, increasing our customer base to over 50 companies, many of them leaders in our target markets, and made a successful initial penetration into the vast Chinese market. In parallel, we broadened our product portfolio in ways that enhance our competitive positioning in our addressable markets. We believe these are differentiating advantages that will help us continue to win business and to grow our company over the long term."

&

SILC: Q1 EPS 26c vs 22c Meets 26c Est
Monday , April 28, 2008 08:30ET

QUARTER RESULTS
Silicom Ltd (SILC) reported Q1 results ended March 2008. Q1 Revenues were $7.70M; +27.34% vs yr-ago; BEATING revenue consensus by +0.17%. Q1 EPS was 26c; +18.18% vs yr-ago; MATCHING earnings consensus.

Q1 RESULTS      Reported      Year-Ago     Y/Y Chg      Estimate    SURPRISE
----------  ------------  ------------  ----------  ------------  ----------
Revenues:         $7.70M        $6.05M     +27.34%        $7.69M      +0.17%
----------  ------------  ------------  ----------  ------------  ----------
EPS:                 26c                  22c         +18.18%           26c       0.00%
----------  ------------  ------------  ----------  ------------  ----------

[la-onda]

SILC: Merriman Cuts to Neutral from Buy; Analyst Notes
Tuesday , April 29, 2008 08:52ET
Issuer: Silicom Ltd (NasdaqNM: SILC)
Analyst Firm:  Merriman Curhan Ford & Co.
Ratings Action: DOWNGRADE
Current Rating: Neutral (from Buy)

Analyst Comments: Despite in-line 1Q08 results, the firm is downgrading SILC shares to Neutral from Buy given the prevailing headwinds that its core customers are experiencing and the related impact to the company's bypass card and adapter sales. While Silicom expects to see continued growth in these business segments, visibility continues to remain weak, which can result in back-end loaded quarters (~50% of sales in month 3 - their estimate). They are encouraged by the company's movement into adjacent markets to help diversify its business, but until there is improved visibility with some of its largest customers, the firm is moving towards a more cautious stance.

&

SILC: Downgraded on Customer Headwinds as Company Looks to Chinese Server Mrkt
Tuesday , April 29, 2008 16:00ET

By Michael Cavallaro, [email protected]

Trading on Silicom Ltd (NASDAQ NM: SILC) was down 5.847% following this morning's news that Merriman Curhan Ford & Co. had downgraded the company's shares from Buy to Neutral given the prevailing headwinds that its core customers are experiencing and the related impact to the company's bypass card and adapter sales. Said the analyst firm, "While Silicom expects to see continued growth in these business segments, visibility continues to remain weak, which can result in back-end loaded quarters. In lieu of this, the company has moved into adjacent markets to help diversify its business.

During yesterday's conference call, the company reported that vendors in the LAN optimization market such as Riverhead were showing signs of slowing growth with elongated sales cycles. Said CEO Shaike Orbach, "This is a concern for us because this is a significant market for us. In our conversation with customers, they're more than concerned because orders were being placed more quickly, and we're directly in the food chain."

Silicom also reported a $1.8M purchase order in the Chinese server market, which rose above the gross margin range. Gross margins were impacted by the Chinese server order because of fiber costs where margins are high. Going forward the company hopes to penetrate additional vendors based on this win. Said Orbach, "This customer is working project to project, so we can't be sure about receiving additional orders. But once they're able to acheive more projects, we have reason to believe we will have more purchase orders. Right now the customer is working to get more projects."

[phabrux]

SILC

here is the update chart after a 3 days plonge.

[David Randolph]

I think most people here knows SILC reasonably well.

It's obvious that the stock is bearish from a technical standpoint, as one can see in the following chart:



Down 71% in about 8 months. What happened?

Well, fundamentally, nothing very dramatic happened. The company just didn't keep growing very fast on a quarterly basis, as it reached a plateau in EPS, between $0.25 and $0.28 a quarter.

So, the p/e multiple came down from 28 or so to the current 8 or so.

This last fall, from $13 to $8, was due to the downgrade la-onda posted above (and I've attached the complete analysis). The analyst didn't have much to complain about, he was just fearful that SILC's major costumers, Cisco and Riverbed, were slowing down orders. ARUN is also another company which is probably SILC's costumer, at least it is in the same area as RVBD.

Well, I was bearish in ARUN and RVBD because those stocks seem so way overvalued using the usual metrics. But it seems I was wrong, as you can see in the following two charts, these stocks are making bullish technical signals:





Now, I don't understand very well why they're turning bullish, but the fact is that they are, and this should put a more positive spin on SILC. This still didn't happen, as SILC has been going down every day, but I guess it will happen sooner rather than later.

SILC is now a $56 M market cap company, with revenue of $28.4 M over the last 12 months. The company also earned $1.04 per share in the same period, so its trailing p/e multiple is 7.9. I believe it doesn't make much sense to value SILC's costumers at 100 times earnings (RVBD), or negative p/e (ARUN) and at the same time, value SILC, the company providing them products for them to do what they do, at just 7.9 times earnings.

If the costumers grow, SILC will also grow. So, why the differences in valuation? It isn't because of recent numbers, because if SILC experienced a slowdown, others saw an even more meaningful decline in revenue and EPS in Q1 08.

I've missed several stocks which at some point were very attractive because I was fearful. I'm going to get more confident and recommend bargain hunting SILC at this point. The balance sheet also provides safety, with $26 M in working capital and $19 M in cash (good for a $56 M market cap company).

The plan is:

Add SILC to the Main at today's opening price, 6.66% of capital as usual.

[Ramsburg]

Update:

Like David mentioned, SILC technical outlook was bearish, and even with the recent pullback it is still bearish. Anyway, David's motivation on this trade had nothing to do with technicals, this is a bargain hunt based on the stock valuation at these prices (which is something impossible to do with technical analysis alone).

The timing for this trade looks great for now, SILC is still trading at 8 times earnings, while its industry trades above the 20's. Even with downgrades and lower estimates, it doesn't make much sense to watch this stock trading on this kind of multiples.

From a TA perspective we can't add much yet, the volume generated in this last down swing may suggest some sort of selling exhaustion, but it's too early to conclude.
There is a Gap opened above $11, a descending resistance near $12, and the EMA-50 on the same zone... so if I had to call a target for a pullback, I would point something like $11/$12, but as I said, not a very solid technical perspective yet as we may watch a lot of short term «noise».

Trading Plan:
HOLD SILC

Regards,

[Ramsburg]

Update:

SILC has performed a few triangular patterns during the last few months; unfortunately all those symmetrical triangles were broken to the downside...
Well, SILC is once again with a clear triangulation for the short term, so we must be protective, and even if the stock has great fundamental prospects and is clearly trading at bargain multiples, I'm setting a tight stop level (taking in consideration the triangle setup right now).

So the new trading plan is

Trading Plan:
HOLD SILC with a stop @ $8.20

[Ramsburg]

Update:

Just a quick technical update:
The triangular layout needs to be updated but can still be considered (as the recent market action changed the pattern).
We can still considerate the inversion scenario, SILC didn't had much price or volume action for the past weeks, but it is still holding these level quite well. Our entry was at $8.32, current short term support at $8.30 and our stop at $8.20 makes this trade a low risk shot to catch a decent rebound play. The trading plan remains the same:

Trading Plan:
HOLD SILC with a stop @ $8.20

[Ramsburg]

SILC stopped @ $8.20