At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.
But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.
What? Me, worry?
For months, market pundits have worried themselves silly over concerns of a "capacity glut" on the Flash memory market. But not so fast, says Wall Street. Between Apple and its iPad, and competing products from Research In Motion
This morning, analysts at market researcher Trefis pointed to the 35% sales growth reflected in NAND memory specialist SanDisk's
This echoes yesterday's SanDisk upgrade from ace stock picker Sterne, Agee. Far from fearing the overcapacity and crimped margins that others have been predicting, Sterne says strong demand for tablet PCs and smartphones threatens to create an honest-to-goodness shortage in NAND memory this winter. While it's true that rivals like Micron
Wall Street concludes that all is well in the flash memory market. But is it right?
Let's go to the tape
If you're seeking advice on semiconductor stocks, you could do a lot worse than listening to Sterne, Agee. Ever since the analyst began covering semi stocks last year, the returns on its picks have beaten the market. From Skyworks
Sterne, Agee Said:
Sterne, Agee beating S&P By:
|RF Micro||Outperform||****||43 points|
Call me a crazy optimist, but I think Sterne, Agee is making the right call on SanDisk again today.
Selling for just 9.1 times trailing earnings, and 11.5 times the rest of Wall Street's pessimistic projections, SanDisk is much cheaper than the average S&P 500 stock (which will cost you closer to 13.7 times forward earnings). With a price that low, you might expect SanDisk is growing slower than the average stock, right?
Wrong. Most folks on Wall Street believe SanDisk will outgrow the market by a factor of 25% over the next five years, averaging 12.5% annual profit growth to the S&P's 9.8% pace. SanDisk's expected to outgrow Micron, AMD, and even Intel, making the stock not just an absolute bargain, but also arguably a better deal than many of its rivals in the flash memory game.
Granted, if analysts who were pessimistic about the supply situation just a few months ago can reverse themselves as quickly as they're now doing, there's no way to say they won't flip-flop again next week. Still, with its margins expanding, its sales growing, and the whole darn computer industry seemingly intent on creating demand for its product, I'll take SanDisk's performance over Wall Street's predictions any day of the week.
Intel is a Motley Fool Inside Value selection. Cypress Semiconductor is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor choice. The Fool has written puts on Apple. The Fool has created a bull call spread position on Cisco Systems. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Apple. Motley Fool Alpha owns shares of Cisco Systems.
Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 682 out of more than 170,000 members. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.