Sierra Wireless Q4 2007 Earnings

SWIR - Sierra Wireless (Nasdaq) - (Closing Price on Friday 2/8/08 - $15.92)

Sierra Wireless announced its fourth quarter earnings on January 31 and reported very impressive results.

Sierra Wireless reported revenue of 135.6 million which was a sequentially increase of 22% and a year over year increase of 99%. Sierra Wireless reported diluted EPS of 0.37. This was up moderately from the previous quarter’s result of 0.35 and up significantly from 0.12 last year. For next quarter Sierra Wireless gave guidance for revenue of 136 million and EPS of 0.30.

In the conference call the CEO mentioned he expects continued revenue growth, improved earnings, and business diversification in 2008. He stated that revenue in Q1 will be constrained by component supply limitations but this should clear up by Q2. He also mentioned that the introduction of Gobi and Erickson has increased competition in the embedded module segment but he expects growth in that segment this year.

The stock price of Sierra Wireless briefly traded above seventeen dollars the day after earnings but has sold off since. Investors are selling off stocks indiscriminately and tech stocks and small caps in particular have been getting hit hard. Unfortunately this is depressing the stock price of Sierra Wireless. Over the long term the stock price of any stock will ultimately follow the improvement or deterioration of a company’s fundamentals. Since the fundamentals for Sierra Wireless continue to improve I would continue to hold or accumulate more shares.

Disclaimer: I have no position in SWIR.

Silicom Announces New Chinese Order

SILC - Silicom Limited (Nasdaq) - (Closing Price - $16.70)

Today Silicom Limited announced an order for $1.8 million from “one of China’s largest domestic server companies, representing its first significant penetration into the vast Chinese market.” The stock traded up over 14% on the news.

This is obviously a positive development for Silicom Limited and the stock price is starting to gain some strong momentum. The company just reported very good fourth quarter results and I wouldn’t even consider selling right now.

Some other stocks in the WAN optimization field that have seen undeserved fifty percent drops from their highs last year are BCSI and RVBD. These two stocks are definitely worth further research.

Disclaimer: I have no position in any of the stocks mentioned.

8×8 Reports Q3 08 Results, Shows Continued Improvement

EGHT - 8×8 Inc. (Nasdaq) - (Closing Price on Friday 2/1/08 - $1.22) 

8×8 Inc. reported their Q3 2008 financial results on January 30 and reported record revenues and a small profit.

8×8 reported revenue of 15.8 million which was a 7% increase sequentially and a 19% increase year over year. 8×8 reported net income of 1.39 million and EPS of 0.02 per diluted share. During the quarter, 8×8 sold two of its non-core patents for 1.2 million and accounted for the sale as other income. Without the one time gain related to the patent sale and a gain related to the change in the value of warrant liability 8×8 would have reported a small loss. However, this loss is smaller than the previous quarter and the same quarter last year and the company is still on the right track towards sustained profitability. Overall 8×8 reported a nice quarter.

In the conference call the CEO mentioned a few positive catalysts to look for in the coming year. The CEO stated that the company is seeking to further monetize its intellectual property and to expect the introduction of new services in the coming year. He also said the goal is for consistent profitability going forward.

8×8 is continuing to show improvement in its financial results and I would hold or accumulate more shares.

Disclaimer: I have no position in EGHT.

Silicom Reports Nice Q4 2007 Results

SILC - Silicom Limited (Nasdaq) - (Closing Price - $13.92) 

Silicom Limited announced fourth quarter results today and reported increases in revenue and EPS. The share price responded with a gain over 17%.

Silicom reported revenue of 7.48 million which was a 13% improvement over last quarter and a 49% improvement over the comparable quarter last year. EPS came in at $0.27 which was also an improvement sequentially ($0.25) and YOY ($0.20).

Even with today’s gain of 17% Silicom Limited is trading at a trailing PE of 14. That is very cheap considering the growth Silicom Limited has experienced over the last couple of years. The WAN optimization sector is projected to show strong growth for the next few years which will benefit Silicom Limited in future quarters.

The stock price of Silicom Limited is trading very near my initial recommendation and I still think the company is a good buying opportunity. I would recommend that you continue to hold your shares or even accumulate some more.

Disclaimer: I have no position in SILC.

New Stock Pick: 8×8 Inc. (EGHT)

EGHT - 8×8 Inc. (Nasdaq) - (Closing Price on Friday 1/25/08 - $1.20) 

8×8 Inc. is a company I have been following for a few quarters and I think now is an opportune time to buy some shares.

8×8 Inc. is a VoIP company that enables broadband internet users to add digital voice and video communications to their high speed internet connections. The company also offers a hosted communications solution, Packet8 Virtual Office, which delivers digital voice services coupled with powerful features for small and medium sized businesses and call centers.

The amount of companies subscribing to Packet8 Virtual Office has been quickly growing over the past year. On January 8 of 2007, 8×8 Inc. reported over 6,000 companies subscribed to Packet8 Virtual Office and earlier this year 8×8 Inc. reported over 10,000 companies were using Packet8 Virtual Office.

8×8 Inc. also got an influx of residential customers last year when a couple of other VoIP companies (SunRocket and an unnamed company) went out of business and referred their customers to 8×8 Inc. (more…)

Sunpower Corporation Cover Recommendation

SPWR - Sunpower Corporation (Nasdaq) - (Closing Price - $69.21)

Sunpower Corporation (SPWR) announced their fourth quarter 2007 earnings today and reported disappointing results.

Sunpower reported revenue of 224.3 million and GAAP earnings of 0.06 per share. Revenue and EPS were both down from the prior quarter’s results of revenue of 234.3 million and EPS of 0.10 per share. Sunpower gave mediocre guidance of revenue between 230 and 250 million and GAAP EPS of 0.13 – 0.16 for next quarter. The company also raised full year guidance for 2008 EPS between 1.17 and 1.27 per share.

The share price of Sunpower was down over five dollars today but finished well above its intraday low of $60.25. In my opinion Sunpower is still way overvalued but I am going to recommend to cover. (more…)

Sell North American Galvanizing (NGA)

NGA - North American Galvanizing (Nasdaq) - (Closing Price - 5.45)

North American Galvanizing & Coatings is down quite a bit since I originally recommended it and I am going to recommend to sell.

A competitor of NGA, Azz Incorporated (AZZ) reported their third quarter results on Jan. 4 and reported a sequential decrease in revenue and operating income for their galvanizing segment. Consequently, due to the weak market and the potential for an earnings let down in the coming quarter I think it is best just to sell North American Galvanizing and take a loss.

Disclaimer: I have no position in NGA.

Time to Short Solar Stocks

SPWR - SunPower Corporation (Nasdaq) - (Closing Price on Friday 1/4/08 - $126.12) 

Stocks related to solar power made a tremendous run in 2007 but they are currently grossly overpriced and overdue for a pullback. The insiders of most of these companies have been dumping shares like crazy which is never a good sign. Also, the market is expected to have a turbulent year so I think now is a good time to short some of these companies.

My solar pick to short is SunPower Corporation. SunPower Corporation has shown strong growth over the last year but it currently has at a trailing PE ratio of 631 (that is ridiculously high). For growing companies a trailing PE is less important than the forward PE but SunPower’s forward PE is also astronomical (126 based on the high range of their forecast of GAAP earnings between $0.85 and $1.00 in 2008).

While investors have been buying, the insiders of SunPower Corporation have been dumping a huge amount of shares. Insider selling is never a good sign and the amount of selling that has taken place at SunPower should cause a lot of concern. (more…)

Mad Catz Acquires License for Rock Band Game

MCZ - Mad Catz Interactive (American Stock Exchange) - (Closing Price - $1.17)

Mad Catz announced a new license agreement today to produce and distribute game peripherals and other products for the game Rock Band published by MTV games.

Mad Catz has secured the rights to manufacture, market, and sell game accessories, including both wired and wireless bass guitars, a drum percussion set bundled with drum sticks, and a wired microphone. Mad Catz expects its initial offerings under this license agreement to be available in the first half of 2008.

Mad Catz continues to align itself with popular games and I think acquiring the license for Rock Band is a smart move. The Rock Band game is similar to Guitar Hero which has been highly successful for Activision (ATVI). If Rock Band attains even a little bit of the success that Guitar Hero has had it should be a popular title.

I am surprised the stock price of Mad Catz finished flat on the day but the general unease of the broader markets has weighed on Mad Catz for a while. Mad Catz’s share price is overdue for a pop and the company is coming into its strongest quarter so I would continue to hold your shares.

Disclaimer: I have no position in MCZ.

CAAS Plans to Acquire 36.5% of Henglong Automotive Parts Company

CAAS - China Automotive Systems (Nasdaq) - (Closing Price - $8.28)

China Automotive Systems announced that it has started discussions with Hubei Wanlong Investment Co. to acquire an additional 36.5% of Henglong Automotive Parts Company.

China Automotive Systems currently owns 44.5% of Henglong Automotive Parts Company. In 2006 Henglong posted sales of USD$54.54 million, representing 57% of China Automotive Systems’ total net sales and net profit of USD$9.75 million, while CAAS’ net profit was USD$4.81 million. Acquiring a bigger portion of Henglong will obviously be beneficial.

I don’t see any reason to sell China Automotive Systems and I would continue to hold your shares. According to Yahoo Finance the insider sells that were weighing on the stock price have stopped and there was even an insider buy on Dec. 3. (more…)