Get up bright and early tomorrow morning for a fresh cup of second-quarter financial results from Taiwanese online gaming expert GigaMedia (NASDAQ:GIGM). This Motley Fool Global Gains recommendation has seen some dazzling highs and low lows over the past year, and is currently skimming the bottom of that barrel. Let's see whence the story turns next, in a whirlwind of mixed metaphors -- I'll take mine shaken, not stirred.

What analysts say:

  • Buy, sell, or waffle? Only two Wall Street analysts cover this company -- but they both want to buy the stock. GigaMedia also gets a 98% thumbs-up ratio from more than 960 of your fellow Fools in our Motley Fool CAPS database, making it a solid five-star issue.
  • Revenues. The revenue guidance from those two analysts averages out to $38.0 million, a staggering 81% above last year's $21.0 million.
  • Earnings. But the earnings picture is less impressive, as the analyst duo sings "$0.15 per share!" in unison, which would be down from $0.18 a year ago.

What management says:
Last quarter's operating margin was 24%, way below the 35% seen in the previous quarter. Management explained that the difference was a hefty $0.48 million invested in promoting one game through Taiwanese game shows and television ads. Let's hope that Hellgate: London returns the favor with a solid sales performance this quarter.

What management does:
Why do the analysts expect such a soft earnings trend, given the stellar recent history? Well, the company is now up for comparisons against some really brilliant quarters, and the June 2006 quarter was the highest-profit period in company history.

Y-O-Y Growth

12/2005

3/2006

6/2006

9/2006

12/2006

3/2007

Revenue

34.5%

(46.6%) 

(62.6%)  

(42.1%) 

113.4%

113.4%

Earnings from Cont. Ops.

418%

149.5%

350%

371%

374.3%

315.5%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Just rummaging through the comments from our CAPS players gives you a sense of GigaMedia's massive promise. Our users are talking en masse about a buy-in opportunity thanks to the recent share price swoon, as there have been no reports of harm to the business model.

If we know one thing about the Far East, it's that there are massive populations of gamblers over there. Pachinko machines, extravagant casinos, online poker -- you name it, the Chinese, Japanese, Koreans, and/or Filipinos are addicted to it. That's a massive market for the taking, and exactly how GigaMedia makes its money.

It's a much more focused business model than what rival Netease (NASDAQ:NTES) is doing, and a more direct approach to monetizing the Asian gambling habit than the mostly subscription-based games from The9 (NASDAQ:NCTY) or Shanda Interactive Entertainment (NASDAQ:SNDA). But there are three Foolish newsletter recommendations and 19 CAPS stars between these four stocks -- pick your horse and place a bet. It seems hard to go wrong with such excellent choices.

Fool on:

GigaMedia is a Motley Fool Global Gains pick, while both Shanda and Netease.com are Motley Fool Rule Breakers selections. Interested in diversifying your portfolio to include any of these Chinese stocks? Grab a free 30-day trial of either of these newsletters to read the original recommendations.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure doesn't gamble with your trust and confidence.