Back in good Formfactor (FORM)
Wow! Great results from Formfactor (FORM -- click to register for free RT streaming quote) today ... they beat the high analyst's estimate for earnings and blew away the average by 20% or so and the stock is climbing dramatically in the after hours session thanks to these great earnings and dramatically improved margins.
I wrote in my Annual Checkup that I thought FORM's margins and sales should really hit their inflection point and start dramatically improving in the first quarter of 2006, and I was very pleased with progress following their third quarter conference call a few months ago, but it looks like I was too pessimistic. The margins and sales are already up thanks to even just the partial use of their new facility and a great environment for their test equipment.
Now, of course, I regret not picking up some more FORM just before earnings today -- it looks like $30 was an awfully nice bargain price now that they're hitting their stride ... but as one who has been burned for several quarters by FORM's troubles with bringing their new fab online and correcting contamination problems at their older facility, I can't blame myself for a bit of caution.
Still, I am a big fan of this company's prospects -- now that they have industry-leading flexibility and dramatically increased capacity, as well as much-improved margins on their products coming out of the new facility, they should be able to do a much better job of leveraging their superior product to really boost sales and earnings.
To some extent, Formfactor is subject to the same cycle as the rest of the semiconductor companies have been, but their ability to help companies cut costs and increase production is important in both the expansion and the cost reduction swings in the cycle ... and I'm becoming convinced in part that the semi industry is not going to follow quite the same cycles as in the past -- chips are in so many more products now than just computers, and there are so many different markets for chips, that I expect the cycle to moderate somewhat ... that'll be good for those companies who, like Formfactor at times and like MEMC Electronic materials, are being discounted because all of us fear their eventual dramatic fall. I could certainly be wrong on that.
Can't wait to hear what they say on the call about their great margins and utilization rates in the new facility -- and if this stock market jubilations tempers a bit and the price dips from these ridiculous after hours highs (I saw $37 pass by a few minutes ago, which is more than a 20% boost after hours), I might be tempted to increase my position now that FORM seems to have proven themselves capable of taking the steps forward that we patient shareholders have been awaiting for the past year.
Congratulations, Formfactor.
I wrote in my Annual Checkup that I thought FORM's margins and sales should really hit their inflection point and start dramatically improving in the first quarter of 2006, and I was very pleased with progress following their third quarter conference call a few months ago, but it looks like I was too pessimistic. The margins and sales are already up thanks to even just the partial use of their new facility and a great environment for their test equipment.
Now, of course, I regret not picking up some more FORM just before earnings today -- it looks like $30 was an awfully nice bargain price now that they're hitting their stride ... but as one who has been burned for several quarters by FORM's troubles with bringing their new fab online and correcting contamination problems at their older facility, I can't blame myself for a bit of caution.
Still, I am a big fan of this company's prospects -- now that they have industry-leading flexibility and dramatically increased capacity, as well as much-improved margins on their products coming out of the new facility, they should be able to do a much better job of leveraging their superior product to really boost sales and earnings.
To some extent, Formfactor is subject to the same cycle as the rest of the semiconductor companies have been, but their ability to help companies cut costs and increase production is important in both the expansion and the cost reduction swings in the cycle ... and I'm becoming convinced in part that the semi industry is not going to follow quite the same cycles as in the past -- chips are in so many more products now than just computers, and there are so many different markets for chips, that I expect the cycle to moderate somewhat ... that'll be good for those companies who, like Formfactor at times and like MEMC Electronic materials, are being discounted because all of us fear their eventual dramatic fall. I could certainly be wrong on that.
Can't wait to hear what they say on the call about their great margins and utilization rates in the new facility -- and if this stock market jubilations tempers a bit and the price dips from these ridiculous after hours highs (I saw $37 pass by a few minutes ago, which is more than a 20% boost after hours), I might be tempted to increase my position now that FORM seems to have proven themselves capable of taking the steps forward that we patient shareholders have been awaiting for the past year.
Congratulations, Formfactor.
Labels: FORM
This article posted by One Guy @ 2/01/2006 05:04:00 PM 0 comments
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