SMTX Should Benefit from New Customer, Upswing in Telco Equipment (SMTX)

Includes: CSCO, SMTX
by: Microcap Speculator

The Microcap Speculator submits: Two factors could give a kick to the shares of microcap electronics manufacturing service provider SMTC Corporation (ticker: SMTX).

First, the company announced what appears to be a major contract to manufacture IP and TDM communications equipment for carrier class provider Telco Systems.

Second, SMTC should benefit from the stronger-than-expected results that have been reported over the past quarter by telecom equipment providers like Cisco Systems (ticker: CSCO). SMTC derives a large percentage of its revenues from telecom equipment OEM's (note: Cisco is just an example, I don't know if it is a customer or not), so the general health of that industry is critical to the company's long term results.

Don't expect these effects to show up for another quarter or two. SMTC has guided for lower revenues in fourth quarter 2005 (but said it will remain profitable). Still, these depressed prices provide an attractive entry point in my opinion, as shares will probably be much higher by the time these factors show up in the quarterly reports.

SMTX is up over 25% today since this post. I know its not from the coverage here, as my stats show a fairly light day. Whatever the reason, I'll take it!

DISCLOSURE: I am long SMTX. Not a recommendation to buy or sell any security. For informational and educational purposes only.

SMTX 1-Yr Price Performance: