My comment..SEVEN month old news...Lots of insider sales since. 80% increase in the price of the stock..65% increase in Institutional ownership..
Investec stays with "buy" on InterDigital Communications in report 11/11/02
11/11/02 09:45 AM
Source: Unknown
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InterDigital Communications Corp.
Scot C. Robertson
(IDCC - $13.87)
Rating: BUY
Investec: Year-over-Year Revenue Comparisons Continue to Improve – Reiterate BUY Rating
* InterDigital is scheduled to release fiscal third quarter 2002 earnings before the open of market tomorrow morning.
* Importantly, Sharp continues to gain share in the Japanese market and is beginning to see traction in the European mobile market, while NEC continues to gain traction in both the European and Chinese mobile markets.
* Given that our fiscal 2003 revenue assumptions do not factor potential upside from several significant catalysts, we believe clients interested in a strong and growing wireless franchise would be remiss if they didn’t examine shares of InterDigital carefully.
* Accordingly, we reiterate our BUY rating and $17 price objective on shares of IDCC.
Market Cap (M) $734.0
52-Week Range (NASDAQ) $16- $6
Avg. Daily Trading Volume 360,200
Institutional Holdings 20%
Shares Out. (M) 52.9
Total Debt to Total Capital NM
Float Shares (M) 47.7
Proj. 5-Year EPS Growth Rate 20%
FY 2001A FY 2002E FY 2003E
March ($0.04) $0.00A ($0.01)
June ($0.05) $0.04A $0.01
September ($0.09) ($0.10) $0.04
December ($0.18) ($0.07) $0.09
FY EPS ($0.36) ($0.13) $0.13
FY P/E NMF NMF 107.0x
FY P/S 14.0x 10.0x 7.0x
FY Rev (M) $52.5 $76.2 $103.4
Note: An explanation of ratings and disclosures can be found at the end of this report.
InterDigital is scheduled to release fiscal third quarter 2002 earnings before the open of market tomorrow morning. We are looking for an earnings loss of $0.10 per share (in-line with Street expectations), on revenue of roughly $14.9 million (slightly above the Street consensus of $14.8 million), compared to an earnings loss of $0.09 per share on revenue of $14.5 million in the comparable period last year, and an earnings profit of $0.04 on revenue of $25.1 million in the prior quarter (however, a portion of the revenue stream in Q2 was attributable to accelerated recognition of a $6.9 million deferred revenue associated with a non-refundable and non-transferable royalty prepayment previously received from Kyocera (KYO – NOT RATED) which has discontinued sales of covered GSM products). The company will host a conference call at 10:00 a.m. EST to discuss its results with a dial in number of 877-505-0448.
Importantly, Sharp continues to gain share in the Japanese market and is beginning to see traction in the European mobile market, while NEC continues to gain traction in both the European and Chinese mobile markets. Recently we have heard a lot of chatter and read a fair amount of commentary surrounding the popularity of camera-equipped phones in the Japanese mobile market. By far the leading supplier of these phones is Sharp, which holds the number one position at two of the major service providers, J-Phone and NTT DoCoMo. According to industry sources, Sharp’s total September quarter shipments finished at roughly 1.48 million units, just a nudge above the prior quarter. We believe this is a remarkable feat given overall shipments in the Japanese market fell roughly 9.9%. Moreover, Sharp has increased its shipments 57.4% year-to-date (Apr.-Sep.), while overall shipments in Japan are down 16.3%. Looking ahead, we believe Sharp will see similar success as the company moves its product into the European market. In fact, just recently, Vodafone Group announced that it will start selling Vodafone-branded, camera-equipped handsets made by Sharp. Thus far, Vodafone has ordered 500K handsets, and we have heard from a channel contact that an additional 1-1/2 million could follow throughout fiscal 2003. With an ASP above $300, the revenue opportunity to InterDigital is significant. Likewise, NEC continues to gain significant traction in its bid to penetrate the European and Chinese mobile markets. In addition to infrastructure sales and handset orders the company is seeing from Hutchinson (HTCH – NOT RATED) (i.e., continued base station deployment and an order for two million 3G video devices which should begin to ship in the March quarter), NEC has also received an order to supply 500K camera-equipped phones to China Mobile over the remainder of fiscal 2002 (March 2003). The company expects to increase shipments to one million units in 2003 and three million units in 2004. Although NEC declined to comment on a delivery price, based on a likely over-the-counter price of 60K Yen (roughly $500), this represents a considerable revenue opportunity for InterDigital.
Given that our fiscal 2003 revenue assumptions do not factor potential upside from several significant catalysts, we believe clients interested in a strong and growing wireless franchise would be remiss if they didn’t examine shares of InterDigital carefully. With a solid and growing stream of revenue from current licensees in conjunction with an incremental revenue opportunity that has the potential to finish in excess of two times our current fiscal 2003 projections, we believe InterDigital remains one of the most compelling plays in the wireless sector. In our opinion, clients interested in the story should not be caught empty-handed when a major announcement regarding a Nokia (NOK – NOT RATED) rate determination, favorable resolution of litigation issues with Samsung and Ericsson (ERICY – NOT RATED), or the announcement of new OEM license agreements reaches the newswires. Clearly, our forward assumptions numbers could move very quickly and markedly to the upside if just one of these catalysts were to hit. As such, at current levels we reiterate our BUY rating and $17 price objective on shares of IDCC, and would view any weakness below the $14 level in front of the earnings call as an excellent opportunity to add to or establish positions.
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