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Rambus May Not Be Done Letting The Air Out Of The Balloon

May 07, 2021 3:55 AM ETRambus Inc. (RMBS) Stock2 Comments
MarketGyrations profile picture
MarketGyrations
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Summary

  • Rambus posted solid gains in the top and bottom line for Q1 FY2021 and the forecast calls for its first GAAP profit per share in the last 15 quarters.
  • There are a number of things to be said in favor of long Rambus, although there are also arguments to be made against it.
  • Valuations for Rambus had reached lofty levels after a strong rally into 2021, but the stock has since been underperforming against most semiconductor stocks.
  • Rambus has lowered its asking price to appeal to more buyers and it may have to continue to do so with multiples where they are.
DDR4 memory modules
Photo by scanrail/iStock via Getty Images

Rambus (NASDAQ:RMBS) did what it was supposed to do. The company posted significant gains in terms of the top and bottom line in its latest quarterly report. The forecast even calls for the first GAAP quarterly profit per share in quite

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MarketGyrations profile picture
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Comments (2)

Rainer-63 profile picture
Good article but I don't agree on two points: 1. Rambus isn't expensive with a forward p/e of 14. Other semiconductor companies are far over 30 and increased their stock price some 100%. 2. Most people still don't believe in this company because of their lack of transparency. They never tell you the detailed numbers, they don't talk about their partnerships/clients (they never disclose the conditions), they are vague on many things, the management changed too many times, they bought "strategic companies to boost their numbers" buy they were a often a flop (example the lighting sector, the ticket system they sold then to a UK company ecc). So this stock has a really great technology but will need some more time to let forget their past disasters. On a 5 year time hoizon I would give them for sure an outperform rating because they will be in the most tech markets.
MarketGyrations profile picture
Rambus looks better if forward P/E is used, although it's still higher than what some other semis trade at (with faster growth to boot). However, it's just one metric and one that is prone to changes/revisions at it relies on making guesstimates that don't always pan out.

To get a more accurate representation, it's best to use a composite view. If one metric says one thing and all the other metrics say the opposite, then the latter should trump the former as they are in the majority.
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