SMART Modular Technologies (NasdaqGS: SMOD) is set to report earnings after the market closes on Thursday, June 25th. SMART Modular Technologies is a leading provider of memory products, offering more than 500 standard and custom products to top-tier OEMs in the computer, industrial, networking, and telecommunications sectors. Taking innovations from the design stage through manufacturing and delivery, SMART has developed a comprehensive memory product line that includes DRAM, SRAM, and Flash in various form factors.
Through its subsidiary, Adtron Corporation, SMART offers high performance, high capacity solid-state drives for enterprise, defense/aerospace, industrial automation, medical, and transportation markets. SMART’s Display and Embedded Products Group designs, manufactures and sells thin film transistors (TFT) liquid crystal display (LCD) solutions to customers developing casino gaming systems as well as embedded applications such as kiosk, ATM, point-of-service, and industrial control systems.
SMOD is expected to lose 2 cents for its 3rd quarter. We expect the semiconductor company to announce earnings that will beat investors’ and analysts’ expectations, perhaps even turn a profit.
The last two times SMOD reported earnings, they produced earnings surprises of 300% and 400%. We expect that trend to continue as many smaller semiconductor companies that have reported earnings delivered better than expected results. We believe SMOD will report earnings possibly as high as a profit of 3 cents.
The valuation on this thing isn’t too bad either. SMOD trades at 30 cents on the dollar per share in sales. Most competitors trade at 1.38 times sales. SMOD would have to trade for more than $10 to catch up. Yesterday’s closing price of $2.81 is less than its book value of $3.55. Heck – they have $2 per share in cash. So even a move back to its book value would be rewarding enough.
Looking at Smart Mod’s stock chart, our technical analysis says that a close above $2.91 puts this stock on a collision course with $3.25. Hopefully SMOD’s upcoming earnings announcement and guidance will be the catalyst it needs to get us there as past earnings surprises have seen SMOD’s price jump as much as 40%.
Suggested Closing Price Stop: $2.69
