A Bright Future for China Techfaith Wireless? (CNTF)

| About: China TechFaith (CNTF)

Mobile handset designer China Techfaith Wireless (ticker: CNTF) has experienced a wild ride since going public earlier this year (see chart below). Thanks to comments from many China Stock Blog reader we hope you enjoyed the most recent rise in the stock. Yesterday, I received an e-mail from a reader who sees similarities between CNTF and some of the most successful companies of recent past. Due to his professional position he asked to remain anonymous -- but he would greatly appreciate your comments (NOTE: you no longer have to sign up to comment on articles on The China Stock Blog). Here is a summary of what he said:

Many of the characteristics of CNTF are similar to other big winners in previous market cycles. He believes a comparison with Dell (ticker: DELL) is quite accurate. Dell is a low cost producer of a commodity product which addresses a large market. CNTF does the same. Furthermore, Google (ticker: GOOG) was profitable from early in its life cycle as was CNTF profitable within 18 months of its founding.

But a more important comparison may be with Cisco Systems (ticker: CSCO). When CSCO went public in 1990 it was a similar size company as CNTF with a market cap of around $500 Million. CSCO put up good revenue and EPS growth for many quarters. Despite this, the stock did not rally for several months. Finally, investors began to understand the significance of their business model and addressable market.

CNTF also reminds the reader of Qualcomm (ticker: QCOM). CNTF may not have the intellectual property contained in a QCOM chip, but like QCOM, CNTF is basically a per phone royalty model, like QCOM. A very scalable model.


CNTF chart.