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My scope is to assist private companies both abroad and domestic wishing to go public in the U.S. We invest in the company in the earliest stages, and assist in coordinating their audit, legal RTO or IPO. We also offer M&A identification, execution and consulting, Investors relations... More
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  • PMC-Sierra: Why You Need To Watch This Stock 0 comments
    Feb 2, 2014 10:45 AM | about stocks: PMCS

    Coming from a disappointing quarter, PMC-Sierra Inc. (NASDAQ: PMCS) is expected to make a big come back in the coming months. There are a number of developments to suggest this, but a lot of uncertainty still remains. In order to get the full picture, it is important to understand what was behind the collapse in the company's stock price and from there map the prospects for recovery.

    Quarterly Sales Miss Target

    On the 29th of October 2013, shares of PMC-Sierra Inc. fell by 14 percent during intraday trading, marking one of the biggest single day losses during the year. Partly to blame was the sales announcement for the third quarter of 2013 that missed analysts' estimated target by 2 percent. On the other hand, net income of $20 million was in line with what analysts had predicted. However, a further announcement by the company that sales were to remain flat for the remaining part of the year contributed to further investor pessimism towards the stock.

    Generally, the semiconductor industry is facing challenges as a result of disruptive technologies, stiff competition, and a dynamic market landscape. For PMC-Sierra Inc., this is partly to blame as well as customers who have excess inventory of the company's products. Since we do not expect any significant surprises in sales figures for the last quarter of 2013, investors will be looking forward to sales from the first quarter of 2014 to see if the company is on path to making a comeback.

    Why PMC-Sierra Inc.

    At present, PMC-Sierra Inc. may not seem to be the perfect stock to put your money in. Although the company has seen some quarters where it posted a profit on a year-over-year basis, it is making losses. The company also has a significant amount of debt. As of October 2013, the company was sitting on $100.7 million worth of cash, a drop of $36 million from the previous quarter. What makes it an interesting play at the moment is that investors are not very keen to enter now. Not surprising as the stock is currently 11 percent down as compared to the beginning of this month and Zacks has a "sell" recommendation on the company. Analyzing historical stock data trends shows that one must expect a lot of volatility from this company and it is here where the opportunity areas lie to make a quick return.

    Moving forward, investors should be highly cautious of this stock as analysts have already warned, but it is unwise to discount it just yet. Over the past months, the company has embarked on a number of new product releases and geographical market expansion. These efforts will take some time to bear fruit, but you would not want to enter when the rally is already on. The best decision at the moment would be to include it in your watch list or have a limited amount of the company's shares in your portfolio. Daily traded volumes as well as the 52-week moving average are going to be important indicators to determine if the company has finally turned a corner.

    Stocks: PMCS
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