This Thursday, Samsung (SSNLF.PK) rolls out its latest product offering and it is making it a big event. Things have been going great for Samsung over the last year and that momentum is sure to build with the new launch this week. All eyes, literally, will be on the new technology rumored to be included in these new offerings. We are going to look at four stocks to play on this event, two obvious, one purely speculative and one that will surprise!
Anadigics Inc. (ANAD)
The reason used for the retrace in shares of ANAD over the last month was disappointment at its recent earnings report. Wall Street expected better sales and EPS, but the company is still in the midst of a turnaround that it feels is successful. Samsung accounted for 31% of ANAD's revenue in the most recent quarter as we mentioned above. ANAD has $42m in cash and no debt and revenues over $100m with a market cap of only $90m net cash.
This past November ANAD saw its stock price move from $1.14 to the recent high of $2.87, a gain of over 100%, after it announced it would be powering the Galaxy Note II. We could see a similar press release from the company this week on the new Samsung S4. ANAD has not been shy in the past on releasing press releases and Samsung seems to allow it to. Over the last month the stock has retraced half of that move on what should have been considered a good earnings report. ANAD has found strong support now at its 200-day moving average at $1.74 and looks ready for a significant upside bounce to the 50 day moving average at $2.39.
One way to play the Samsung success and hype of this week's event is Anadigics, Inc. ANAD is a key supplier of power amplifiers to Samsung smartphones and tablets with Samsung now accounting for 31% of ANAD's sales. A few months ago, ANAD saw its stock price double on Samsung sales expectations. The chart below shows ANAD's sales growth with Samsung over the last year.
Qualcomm, Inc. (QCOM)
QCOM trades with a forward PE of 17.9 with $4.37 billion in free cash flow. QCOM has a dividend yield of 2.1% after increasing it by 40% this past week. The company currently has $28.54 billion in cash. QCOM is in a sweet spot in its business cycle right now, and rumors that QCOM's Snapdragon chip could be in both Samsung's new smartphone and in AAPL's newest phone could make the stock a perfect play.
QCOM saw a double top breakout this week at $68. This is the highest level for the stock since the dot com meltdown. The split adjusted all time high is at $88. A break above $72 will set the stage for a move on this level.
QCOM is one of my favorite technology plays for the coming year. It is positioned in all the right markets right now and if the rumors of SnapDragon being included in either Samsung or AAPL's product is true, or both, the upside could be tremendous.
Apple Inc. (AAPL)
Based on every metric out there, AAPL is cheap. AAPL trades with a forward PE of 9.93. The company currently has $137 billion in cash, representing over 25% of its market cap value, and this number grows daily with an annual free cash flow of over $34 billion. AAPL also has a dividend yield of 2.5%. While the argument has been made over the last months that AAPL's growth is slowing, the company is still throwing off impressive growth rates, even for a maturing business model (until the next hot hit arrives).
AAPL has seen its share price shed 20% so far this year. This has occurred as the major indices have broken out to the upside. However, the stock looks poised for a rebound right now. A break above the 20-day EMA at $443 will set the stage for a rebound back to the 50-day moving average at $472. A move through the 50-day will lead to a gap fill at the 200-day moving average at $566. A move like this, given AAPL's past stock performance could occur very quickly. AAPL saw a positive MACD cross today and the last four times this has occurred an average gain of $40 has been seen.
AAPL is so out of favor that it is time to give the stock a very close look. We remind you of Znyga Inc. (ZNGA) which we called a buy in December in our article "Everybody Hates Zynga, Why You Should Love It,"at $2.25. The stock was out of favor and since then it has gained 75%. With the major indices in an all time high breakout, we are likely to see AAPL finally lend its help for the next upside move. For the last several years, the market traded lock/step with AAPL. We may be in store for some of that in the near term. Also, many expect the Samsung launch to be bad for AAPL. The opposite may very well occur! Rumors lately also talk about a possible dividend increase coming any day. There are also rumors of news on new products. There is no better week to release big news and steal the focus from Samsung's event than this week. For this reason this is our "surprise you" play on Samsung this week!
Wave Systems, Corp. (WAVX)
This is an unprofitable small cap, but if it is included in the new Samsung phones that could quickly reverse. WAVX trades with a market cap of $86m.
WAVX experienced a golden cross on its daily chart two weeks ago, a very bullish technical event. A break above 90c should set the stage for a move to the $1.20 area. The stock has found strong support at its 200-day moving average.
Last year WAVX signed a 15 year deal with Samsung enabling Samsung to bundle Wave's EMBASSY Security Center (ESC) and TCG Software Stack (TSS) technology with devices that include a Trusted Platform Module (TPM), an industry standard security chip embedded in the motherboard of a computer or other electronic device. In an SEC filing, Wave said it would receive a per-unit royalty based on Samsung's sales of products that include its technology, but did not provide estimates in terms of expected revenue derived as a result. Samsung has recently ripped into BlackBerry with a marketing blitz that highlights its phones' security capabilities and potential in the enterprise - a spot that has traditionally been a strength for the BlackBerry. This may indicate that the new Samsung phone includes WAVX's enterprise security suite and if true could be a major boon to the stock. This is the pure speculative play for the Samsung launch this week.
These four plays should give both traders and investors opportunities for both near term and long term upside. ANAD is already tied with Samsung. WAVX could look to win inclusion this week. QCOM is the clear winner and my favorite for this year. AAPL is one no one expects to rally this week but the chart and the extreme negative sentiment say it is ready!