Seeking Alpha

Martin Vlcek

 
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  • Super Micro Computer Has The Potential To Become The Next IBM Or HP
     • Sat, Jan. 24 SMCI 17 Comments

    Summary

    • SMCI keeps rapidly gaining market share and growing sales organically at over 40% Y/Y.
    • Sales growth is driven by the U.S. market with ~60% Y/Y growth, while big competitors like IBM or HP struggle to grow.
    • SMCI keeps outgrowing even its smaller peers, but it lacks growth in China so far, which is the biggest future growth opportunity.
    • Already strong secular tailwinds of cloud computing and Big Data may further accelerate.
    • The valuation looks rich, but SMCI is very cheap if you consider the growth rates. I see further upside potential towards the $47-$49 region.
  • Federal Signal Has Significant FCF Generation Potential Following Rapid Debt Repayment
     • Fri, Jan. 23 FSS Comment!

    Summary

    • While long-term sales growth is limited roughly to U.S. GDP growth rates, the markets are underestimating future FCF potential after debt repayment and margin improvement.
    • Most FSS sales could be considered non-cyclical, giving some downside protection in case the economic cycle turns ugly.
    • Relatively high share of domestic sales and natural hedges protect FSS from most of the negative impact of strengthening U.S. dollar and weaker global economy.
    • Very low debt levels protect FSS from potential corporate credit tightening and offers great potential for higher future shareholder value generation.
    • At ~$17.75 intrinsic value, FSS is undervalued and also very inexpensive relative to the general market. FSS offers a ~18% upside within a year and further 10% per year thereafter.
  • The Oil Obituary? Be Careful As The Quick And Easy Money Has Been Made
    Mon, Jan. 12 BHI, BP, RDS.A 10 Comments

    Summary

    • There are several major risks to the short oil thesis from current price levels. The risk/reward of shorting oil is becoming less favorable.
    • With oil trading around a strong $50 psychological price point, brace for more volatility.
    • Iran and Venezuela smell their chance and are desperately trying to hold the $50 line.
    • If OPEC learns from Mario Draghi, the "whatever it takes" rhetoric from dissenting OPEC members could do wonders to the oil price.
    • A sudden reversal of the long U.S. dollar currency trades could cause a sharp oil price reversal.
  • Magic Software: Markets Not Pricing In Any Growth, Creating A Great Buying Opportunity
       • Dec. 9, 2014 MGIC Comment!

    Summary

    • Thanks to several market and stock-specific factors, Magic’s stock retreated ~30% this year from the February peak.
    • The market now prices in virtually zero future EPS and FCF growth beyond 2015.
    • This view is unduly pessimistic given Magic’s growth potential from industry tailwinds, cross-selling and acquisitions.
    • Magic’s upcoming acquisition activity should serve as a strong catalyst within the next three months. The new significant institutional buyer could signal a change in sentiment.
    • My DCF-based valuation is ~$9.50 per share, providing a ~40% upside with a positive risk/reward based on relatively low downside due to strong recurring sales.
  • The Real Reason Saudis Didn't Cut Oil Production
    Dec. 1, 2014 DWSN, GLF, SDRL 250 Comments

    Summary

    • There have been plenty of explanations why OPEC didn’t cut production quotas.
    • Most of them make sense. But they fail to explain the whole strategic long-term picture.
    • There is a rarely mentioned strategic reason why - counterintuitively - oil prices falling and staying low in 2015 is in the best long-term interest of most oil exporters.
    • Moreover, the current status threatens OPEC’s influence over oil prices. OPEC will need to reform and include virtually all major oil producers in quota negotiations. Otherwise, OPEC will become irrelevant.
    • There is also an unexpected historical parallel for the current oil slump.
  • Update: Several Positive Developments For AECOM Technology
    Nov. 28, 2014 ACM Comment!

    Summary

    • David Einhorn's Greenlight Capital established a new medium-sized position in AECOM, his fund's Q3 SEC filings revealed. Recent analyst upgrades are also helping the stock, which continues to perform well.
    • AECOM's Q3 earnings also showed some signs of strength as organic backlog increased. Profitability should benefit from the integration of recent large acquisitions.
    • I reiterate my long thesis and confirm my target price of $36, providing for a ~8% upside within a year, as strong backlog should translate into growing sales and FCF.
  • Update: National Healthcare Posted Solid Comparable Q3 Income While Revenue Jumped
    Nov. 21, 2014 NHC Comment!

    Summary

    • Sales jumped 11.5% Y/Y, a slightly slower growth rate than last quarter but still very robust. Comparable income increased 5.1% Y/Y.
    • The long thesis continues to perform very well on continued facility expansion and comparable growth.
    • I reiterate my long thesis and my target price of $70, providing for a ~15% upside within a year.
  • Update: Evolution Petroleum Posted Weak Q3 Results, But Will Be Able To Invest In Future Growth Again
    Nov. 19, 2014 EPM Comment!

    Summary

    • Although Q3 results were weak as revenue and EPS fell Y/Y and sequentially, the major positive news was that starting November, EPM will have higher share on the Delhi field.
    • After strong 2013 performance, the stock weakened in 2014, in line with the oil & gas industry’s weakness, exacerbated by the recent oil price slump. The stock now yields ~4.56% in dividends.
    • I reiterate my long thesis based on the expected FCF growth from the Delhi field. My target price of $11 offers a 26% upside within a year.
  • Update: CGG's Numbers Improve Sequentially Despite Ongoing Tough Market Conditions
    Nov. 19, 2014 CGG Comment!

    Summary

    • Despite a difficult environment, CGG reported resilient Q3 results, as sequential numbers improved on flat sales. However, the oil and gas industry is not out of the woods yet.
    • After a further dive in October, the stock staged a sharp rebound following the Q3 results. CGG continues to be a long-term bet for very patient investors.
    • I reiterate my long thesis as CGG continues to adjust to market conditions. I keep my target price at $16, providing a very solid 90% upside potential within several years.
  • Update: Multi-Fineline Electronix Returned To Profitability On Strong Q3 Sales Growth
    Nov. 15, 2014 MFLX Comment!

    Summary

    • Sales were at the higher end of the company’s range while gross margin exceeded guidance range as the company returned to profitability.
    • The stock has been falling, in line with most semiconductor small-caps but recently rebounded on positive results as restructuring seems to be working.
    • I reiterate my long thesis based on the company’s return to positive EPS. I keep my target price at $15, providing an excellent 39% upside. Downside should be protected.
  • Update: NICE Systems Blows Past Q3 Sales And EPS Targets On Accelerated Growth
    Nov. 13, 2014 NICE Comment!

    Summary

    • NICE Systems delivered revenue and EPS above its guidance range. Revenue jumped 9% Y/Y, non-GAAP EPS grew 13% and GAAP EPS turned strongly positive after a small loss last year.
    • The new strategy of higher focus, stronger growth and improved profitability has started delivering very strong results and the stock price has been responding positively.
    • I reiterate my long thesis and raise my target price to $50 for a ~10% upside after an already strong price run-up.
  • Update: Echelon Refocuses On Industrial Internet Of Things As Sales Drop Continues In Q3
    Nov. 13, 2014 ELON 2 Comments

    Summary

    • With the sale of the Grid business this quarter, Echelon is now focused entirely on the emerging opportunities in the Industrial Internet of Things (IIoT).
    • There is more growth potential but also more concentration risk. Margins are starting to improve but sales continue to fall Y/Y, albeit at a slower rate.
    • Echelon’s stock continued to fall and until I see a clear sign of a sustainable top-line growth, I continue to recommend staying on the sidelines.
  • Update: Gaiam Posts Very Strong Organic Sales Growth While Gaiam TV Spin-Off Is Pending
    Nov. 12, 2014 GAIA 6 Comments

    Summary

    • Top line grew 14.2% organically Y/Y while margins continued to improve. Adjusted net loss remained roughly flat Y/Y on investment in the rapidly-growing Gaiam TV which grew 107% Y/Y.
    • The long thesis continues to work well as the company continues to focus on core areas of wellness and yoga while divesting other assets that unlock shareholder value.
    • I reiterate my long thesis and raise my target to $9 based on strong top line growth and pending Gaiam TV spin-off.
  • Update: Houston Wire & Cable Reported Continued Sales Growth In Q3 Despite Headwinds
    Nov. 11, 2014 HWCC Comment!

    Summary

    • Despite challenging market conditions in the Maintenance, Repair & Operations segment, where sales dropped 4% Y/Y, HWCC reported 1.6% total sales growth thanks to 12% project business sales increase.
    • The stock continued to gain overall on solid performance despite tough competition and falling MRO sales, as margins and EPS remained roughly flat and stock repurchases continued.
    • I reiterate my long thesis and keep my target at $14.80 on continued solid performance and generally improving outlook.
  • Update: Exar's Turnaround Continues As Acquisition Growth Excels
    Nov. 11, 2014 EXAR Comment!

    Summary

    • Exar delivered strong acquisition-driven sales growth. Organic growth was in the low single digits Y/Y. Adjusted EPS was slightly positive but GAAP loss reached $(0.50) on one-time charges.
    • The stock continues to lag on general small-cap semiconductor segment weakness but also on continued slump in DCS segment sales, which should now be bottoming nonetheless.
    • I reiterate my long thesis based on the bottoming DCS sales and expected restructuring savings. I keep my target at $10 but downside should be protected.
  • Update: Federal Signal Reported Another Record Quarter With Rising Sales And Margins
    Nov. 9, 2014 FSS Comment!

    Summary

    • Federal Signal sales were up 5% Y/Y and adjusted EPS jumped 33%. Operating margins improved, while net debt rapidly decreased. FSS announced a new 7.7% stock repurchase plan.
    • The stock continues to perform well and is now up more than 50% since my 2013 call. However, it’s been trading range-bound for most of 2014.
    • I reiterate my long thesis and based on the strong results and improved prospects, I raise my target price from $16 to $17.
  • Update: CaesarStone's Robust Organic Growth Shows No Signs Of Slowing Down
    Nov. 8, 2014 CSTE 2 Comments

    Summary

    • CaesarStone’s stellar organic growth rates continue. The U.S. growth rate of 47% Y/Y is even slightly higher than one year ago. Canada and Australia delivered excellent results, too.
    • The stock continued to perform well and delivered ~25% returns since my June 2014 updated thesis called the dip a great buying opportunity. The U.S. manufacturing expansion is on track.
    • I reiterate my long thesis and raise my target price from $59 to $69 within 12 months on continued strong results, increased guidance and further U.S. growth room.
  • Update: Oclaro's Turnaround Shows Improvement In Q3 But The Figures Are Still Negative
    Nov. 8, 2014 OCLR 2 Comments

    Summary

    • Oclaro keeps selling assets to raise cash and streamline operations as there are signs of the turnaround starting to work. However, the improvement is slow and the numbers are still negative.
    • The stock continued to slide in line with the industry and small-caps. My long OCLR positions expired in October. I don’t plan to renew before I see a lasting turnaround.
    • I reiterate my turnaround thesis and the $2.30 target price but this has become a risky, low-conviction bet due to no downside protection available through put options.
  • Update: Delek Logistics Partners' Q3 Net Income Grows Despite Lower Sales
    Nov. 8, 2014 DKL Comment!

    Summary

    • Q3 sales were 6.3% lower Y/Y but net income grew 15.7% Y/Y, driven by higher volumes and increased margins despite lower RIN benefits.
    • The stock continued to perform very well, driven by very strong results in the previous quarter, setting a very high bar for sequential growth now and Y/Y growth in 2015.
    • I remain bullish on Delek Logistics and raise my target price slightly to $45 per unit, offering a ~10% upside plus the almost 5% distribution yield.
  • Update: ION Geophysical's Q3 Earnings Weak, Outlook Cautious
    Nov. 8, 2014 IO Comment!

    Summary

    • ION Geophysical missed badly on revenues and earnings as it reported a loss of $(0.15) per share for Q3. Rising sales in the solutions and data library were a positive.
    • IO continued to slide on further oil price weakness and industry softness. This is a long-term thesis and IO could remain weak until sentiment and industry conditions improve.
    • I confirm my long thesis and the $7 target price which should be achieved at the height of the next up cycle, in several years.
  • Update: Allete Posted Robust Results Again In Q3
    Nov. 7, 2014 ALE Comment!

    Summary

    • Strong results for Q3 include 15% Y/Y sales growth and 54% EPS growth. Several new projects will increase sales in the first half of 2015.
    • The stock continued to perform very well on robust results and positive utilities and high-dividend stocks sentiment.
    • I remain bullish on ALLETE and raise my target price a bit to $55 on stronger-than-expected 2014 results and bullish 2015 outlook. ALLETE is a solid defensive stock to hold.
  • Update: Tidewater Weathers The Oil Storm Well With Strong Q3 Results And Stable Outlook
    Nov. 6, 2014 TDW 2 Comments

    Summary

    • The overall utilization rate fell slightly, but day rates increased by a strong $700 sequentially, driving solid revenue growth of 7.5% Y/Y and 2.5% sequentially. Adjusted EPS was up 6% Y/Y.
    • Industry outlook and day rates forecasts remain solid despite the current oil market turbulence. Tidewater stock continues to consolidate after the recent fall followed by my buy recommendation.
    • I confirm my long thesis and keep my target price at $49.50, offering a ~35% upside within several years, as the industry stabilizes and sentiment turns positive again.
  • Update: Regis Corporation's Same-Store Sales Rise In Q3 As The Transformation Continues
    Nov. 5, 2014 RGS 6 Comments

    Summary

    • Sales were slightly down Y/Y due to net store closures. However, comp sales were up 0.6%, driven by strong franchise performance and the sales of products.
    • The transformation continues and starts to deliver tangible top line results, positively influencing the stock price since my last update three months ago.
    • I confirm my long turnaround thesis from 2013 and raise my target price to ~$19.50 due to the company’s return to growing same-store sales and overall solid transformation progress.
  • Update: DXP Enterprises Q3 Results Miss On Sales But Organic Growth Continues
    Nov. 5, 2014 DXPE 4 Comments

    Summary

    • Organic sales growth on a same-store basis continues and the total sales growth was boosted by the acquisitions made earlier this year. EPS and EBITDA continued to grow as well.
    • DXP stock continued to be weak amid small-cap slump, but also due to the steep decline in oil prices.
    • I confirm my long thesis but lower my target price to $80 based on oil price volatility. The target price still offers a ~24% upside within two years.
  • Update: Haemonetics Needs A Sales Growth Infusion Following Q3 Sales Miss And EPS Beat
    Nov. 5, 2014 HAE Comment!

    Summary

    • Revenue was down 3.5% Y/Y in Q3 but flat for trailing six months in constant currency. Adjusted EPS was down 29% Y/Y for Q3. FCF guidance is lowered but solid.
    • The long turnaround thesis is starting to deliver mediocre results amid small-cap weakness and stagnant sales as legacy products continue to weigh on a strong performance of the growth portfolio.
    • I confirm my long thesis and keep my target price at $45, providing ~28% upside within two years as the turnaround continues and sales are expected to start rising.
  • Update: DSP Group's Q3 Earnings Deliver A Strong Revenue And EPS Beat
    Nov. 4, 2014 DSPG Comment!

    Summary

    • Revenue growth returned in Q3 and gross margin improved Y/Y. EPS grew mildly as well.
    • The long thesis continues to deliver more than solid returns on continued transformation from legacy to growth products and on improved financials.
    • I confirm my long thesis and raise my target price to $11, providing a ~10% upside within a year.
  • Update: Orbotech Posts Strong Q3 Results, Beating On Sales And EPS
    Nov. 4, 2014 ORBK Comment!

    Summary

    • Revenue was up 48% Y/Y, including the acquisition of SPTS. Adjusted EBITDA up 68% Y/Y, non-GAAP EPS up 65.5% Y/Y, and GAAP EPS down 39% Y/Y on one-time acquisition costs.
    • The long thesis continues to deliver more than solid returns on continued solid acquisition execution.
    • I confirm my long thesis and raise my target price to $18.50, providing a ~15% upside within a year, plus a 10% to 15% annual appreciation in the long run.
  • Update: Empire District Electric Posts Strong Q3 Earnings And Raises Guidance
    Nov. 1, 2014 EDE 3 Comments

    Summary

    • EPS was down ~1.8% Y/Y in Q3 but up ~21.3% for the trailing twelve months ended September. EDE also raised the quarterly dividend by 2%.
    • The long thesis continues to deliver more than solid returns and dividends on continued sales growth and renegotiated pricing.
    • I confirm my long thesis and raise my target price to $32, offering ~10% upside within a year.
  • Update: Greatbatch Q3 EPS Growth Strong But Sales Growth Lags Again
    Nov. 1, 2014 GB Comment!

    Summary

    • Sales rose 2% Y/Y, 1% organically in Q3 but increased 5% Y/Y YTD. EPS continued to grow at a strong pace of 12.3% Y/Y. Most segments outgrew the industry.
    • Greatbatch stock continues to perform well, quickly regaining most of the lost ground from the current broad-market pull-back.
    • I am confirming my long thesis and raising my target price to $53 per share based on continued strong EPS growth and raised future prospects.
  • Update: Electro Scientific Industries Q3 Loss Narrows As Sales Show Strong Momentum
    Nov. 1, 2014 ESIO Comment!

    Summary

    • Sales were up 22.5% sequentially but still down 28% Y/Y. Net loss was $0.20 per share and non-GAAP loss narrowed by 40%.
    • ESIO stock continued to trade sideways since May when the restructuring began and seems to be bottoming. As the restructuring benefits start to flow in, ESIO should see improving margins.
    • I am reiterating my thesis and the $16 target price, offering a generous 125% upside within several years as the company gradually returns to profitability. However, downside should be protected.
  • Update: Remy International Posts Solid 9% Top Line Growth Despite Challenges
    Nov. 1, 2014 REMY 2 Comments

    Summary

    • Sales grew 9% Y/Y despite challenging and eventful Q3. Adjusted EBITDA fell 6% Y/Y and GAAP loss reached $0.33 per share on one-time restructuring and legal settlement costs.
    • I listed the large Fidelity stake as one of the main risks to the long thesis. The 51% spin-off puts temporary pressure on Remy but will give it more freedom.
    • Although the stock is down ~10% since my original article, I confirm my long thesis and keep my target price at $32, providing a strong 80% upside within several years.
  • Update: Extreme Networks' Revenue Fell Sharply In Q3 On Delayed Tenders And Restructuring Disruptions
    Oct. 31, 2014 EXTR Comment!

    Summary

    • Sales fell 12% Q/Q and 16% Y/Y due to several political and currency headwinds all around the globe, as well as from the distribution network and partner system restructuring.
    • The stock continued to fall in line with the small-caps and networking industry companies on project delays, as well as restructuring costs.
    • I confirm my long thesis and keep my target price at $5.50, providing ~50% upside within two years on improved margins from acquisition synergies and reinstated E-rate program sales.