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Here's one forecast for 2010 that's likely to be realized: The tech sector's recovery will continue, and that's a major reason I'm reiterating my buy rating for FormFactor Inc. (FORM), first recommended on July 6, 2009, at a price of $19.90.
One key qualifier, however: Don't invest in FormFactor, a designer and manufacturer of wafer probe cards for the semiconductor industry, if you can't tolerate high risk and volatility. FormFactor's stock chart mirrors a roller-coaster: A 20% plunge following a 30% rise can occur.
Concerning FY2010 revenue, look for better quarters are ahead for FORM: Wafer probe card sales should increase in 2010, and orders are likely to increase as well, as FORM's clients rebuild inventories that were pared-back during the nearly two-year recession. The First Call FY2009/FY2010 EPS estimates for FORM are a loss of $3.12 and a loss of 84 cents.
Technically, FormFactor's stock chart, as noted, is not for the faint-of-heart: a quintessential roller-coaster. Still, the overriding technical signal is bullish: an uptrend, albeit one that re-tests (and violates) the key, 50-day moving average once a month!
2010 Outlook: FormFactor is a long-term play, but if you're looking to sell FORM within the year, take your profits after it rises to $29.
Stock Analysis: FormFactor is a high-risk stock. Don't buy FORM if you cannot tolerate 20% to 30% stock price swings in a month. If you've already purchased the company's shares, hold them. If not, and you can tolerate high risk, consider buying a 25% position in FORM now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your FORM position before March 2010. Sell/stop loss if you were to buy shares in this company: $13.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
1-19-2010 @ 2:57PM
andrei said...
I agree with your view of a bumpy road ahead, but from your notes it is not clear why. Is this because their competition is much stronger that it use to be, so they are not the only game in town? Are their products still high-margins, or not? What markets are they playing in and what is the trend of this markets as well as their requirements (i.e. DDR3 should be tested at speed, but this is not possible using a one-touch probe card) Did they fix their cost, manufacturing and process problems...?
Very shalow analysis with pompous words.