Constituent Review
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J. Andrew Braswell, Equity Analyst
Newbridge Institutional Research
Data as of 3-30-07 |
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Nano
Electronics |
Review
1/17/07- NVEC reported financial results for the quarter ended 12/31/06 after the close. Total revenue was $3.86M (+48% Y/Y), including product sales of $3.40M (+95% Y/Y). Net income for the quarter was $1.05M (+162% Y/Y), or $0.22 per share. NVEC ended the period with $1.26M in cash and $14.7M in long-term investments. There was no new information given in the conference call regarding MRAM licensing agreements.
2/14/07- Said that it had signed a distribution agreement with Newark InOne, under which the company will sell NVEC’s IsoLoop® Spintronic Coupler line.
3/5/07- Announced that its IsoLoop® Spintronic Couplers are now available through ELFA AB, a catalog distributor serving northern Europe.
3/20/07- Announced that that it had been notified by the USPTO of the expected grant of a patent, titled “Radial field generating selector silicon device.” The invention relates to addressing Vertical Transport MRAM arrays. According to the company, the Defense Department has indicated that this high-density type of MRAM may be applicable in general ultra-dense nonvolatile memory or as a hard disk replacement. This grant brings NVEC’s U.S. patent total to 41.
Commentary
The top NNIX performer with a gain of 111% in 2006, NVEC retraced by 11% in Q1. Shares gapped down in response to the Q1 earnings release, eventually falling below $21 after seeing more than $45 back in November. With a miniscule float of about 4M shares, roughly half of which are held short at any given time, this volatility should be expected to persist. Net income growth continues on a strong pace, outrunning revenue growth as sales of spintronic data sensors and couplers constitute a larger portion or revenue relative to low-margin contract research. We like this small-but-growing base business in which the company has no direct competition from similar technologies, and the new distribution deals signed this period will help sustain the growth. But without any monetization of MRAM patents, on which we got no new information this quarter, the base business seems to us fully valued at the current 34x EPS and 8.2x sales.
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