Well, at least it didn't screw up twice.
That is, sad to say, about the only nice thing I can say about Sigma Designs'
Thanks heavens for small blessings
Frightfully small, in light of the rest of the news. Gross margin eroded by nearly 700 basis points, and operating margins simply fell off a cliff, dropping from just under 34% to a mere 7.7% margin. For context, that's comparable to the kinds of margins that rivals Broadcom
Result: Earnings plunged more than 80% to land at $0.14 for the quarter.
What's management got to say for itself?
Management recited its usual litany of promises on how it will pull out of this slump, boasting of its leading position in Microsoft's
Meanwhile, the buy thesis for this stock continues to rest not on its ability to grow like a weed, but rather on the simple fact that it's got a fat bank account and a cheap stock price (roughly $7.30 per diluted share in cash and short-term and long-term marketable securities, for a $9 stock).
Unless and until SD masters the concept of "underpromise, overdeliver" (and not the other way around), this stock remains in the incongruous and unenviable position of being an extreme value play, somehow occupying a slot in the Motley Fool Rule Breakers portfolio.
Personally, I cannot fathom why Sigma Designs still occupies a place in our pantheon of hypergrowth stocks ... but at the same time, I can't imagine it being sold at this deep a value.
Fool contributor Rich Smith does not own shares of any company named above. Sigma Designs is also a Motley Fool Hidden Gems Pay Dirt selection. Microsoft is a Motley Fool Inside Value pick. The Motley Fool has a disclosure policy.
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