LEXR
You have to love the sector they are in. Cell phones,PDA's,digital cameras, cell phone cameras, MP3 players and who knows what other digital products that will require storage are growing at exponential rates. The Photo Marketing Association estimates there are 23 million digital cameras in the US alone. LEXR estimates that there will be 40M more digital cameras sold in 2003. Infotrends Research Group sees that by 2008 digital cameras will nearly replace film cameras. OVTI estimates that the cell phone camera market will be in the 36-37 million area for 2003. By 2005 it is estimated that 50% of all cell phones will be camera enabled.
Currently, growth is needless to say strong. Q2 shipments were up 29% Q over Q. Revenues of 85.4 M were a 140% jump yoy while eps was up 350% yoy to .09/sh. WR Hambrecht estimates 25% unit growth excluding JumpDrive....while SNDK is estimated to grow 30% excluding mini-SD units. Hambrecht estimates SNDK Q3 revs at 248 M and .41 eps; while LEXR Q3 numbers should be 93.4 M and .09 respectively. At least 1 analyst has opined that he/she felt LEXR is taking share in the removable storage media segment (whether from SNDK or other more minor players I don't know). CEO Stang has stated the same. LEXR is #1 in the key chain drive segment. They also sell a 4gigabyte memory camera card. New market targets will be the disk drive space. A 128 Mg key chain drive could replace 88 floppys. Retail exposure for LEXR has gone from 13000 stores in 2002 to
over 40000 in 2003 (as of August)
The stock was recently roiled by the news that Samsung was going to start manufacturing Memory Sticks for SNE. An analyst then opined that LEXR was more exposed to that competition than SNDK and the stock sold off. The fact that Samsung was going to enter this market did not seem to bode well for LEXR since Samsung furnishes LEXR its wafers for flash supply. SNDK while having less exposure to the memory Stick (about 6-7% of sales), it also has a dedicated flash supply through its JV with Toshiba. SNDK also is more diversified into mini-SD,USB flash drives, xD-Picture and the Memory Stick.
The concern over wafer supply would seem to be a non-event since LEXR has guaranteed supply contract with Samsung and Samsung has about a dozen fabs on stream or close to coming on line. Samsung's entry into the Memory Stick arena would seem to be more troubling since LEXR does depend on Memory Stick sales for about 30% of sales. While Stang says that Samsung's entry will open the market acceptance and drive sales for all producers of the Memory Sticks, I can't help but think that he'd rather they hadn't come in. Can overall market growth for removable media make up for possible incursions into one of LEXR's main revenue drivers? That is the question....
One other factor should be considered in the investment (if it is an investment) process and that is the price paid for the stock. While LEXR's share price is certainly lower than SNDK's
on a dollar price basis; actually SNDK trades at a lower P/E and given it's higher growth rate, a lower PEG. If it's a trade...and then pick whats moving. Fundamentals are definately less of a factor in a trade....just trade what your T/A tells you.
Anyway, thats my .02, Rob
