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    Stock Alert for Sigma Designs Inc. (SIGM)

    Sigma Designs Inc.  (SIGM ) is a fabless provider of highly integrated system-on-chip (SoC) solutions that are used to deliver multimedia entertainment throughout the home.  It offers four separate product lines: media processor, home networking, video image processors and home control and energy management automation products.  Each of these product lines contributes to its fully integrated SoC offerings.  The Company sells its products into four primary markets which are the Internet protocol television, or IPTV, media processor market, the connected home market, the connected media player market and the prosumer and industrial audio/video market.  It also sells a small amount of its products into other markets, such as the high definition television, or HDTV, and PC-based add-in markets, which the Company refers to as its other market. 

    Share Statistics (25-Aug-11)   FY

    2010

    FY

    2011

    %

    Chg

    Q2

    2010

    Q2

    2011

    %

    Chg

    Symbol SIGM Revenue, $Mn 206.08 286.92 39.2% 65.18 60.63 -7.0%
    Current price $7.76 Gross marg. 44.5% 49.0% 10.1% 49.3% 49.1% -0.4%
    52wk Range: $7.33-$15.02 Oper. margin 2.7% -9.5%
    Avg Vol (3m): 480,126 Net margin 1.2% 3.2% 166.7% 1.7% -9.4% -652.9%
    Market Cap. 246.88M              
    Shares Outstanding 31.82M EPS, $ 0.09 0.44 388.9% 0.04 -0.18 -550.0%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Shares of SIGM have lost 2.63% in the last five days; 10.70% in the last month; and 26.31% year-to-date.

    SIGM on Thursday slipped to a new 52-week low of $7.33, a day after the the Milpitas, Calif -based semiconductor maker disappointed with its second-quarter earnings.  Shares lost 8.06% to close the session at $7.76, on above-average volume of 1.74 million shares.

    SIGM posted net revenue of $46.7 million for the second fiscal quarter ended July 30, 2011, down $13.9 million, or 23%, from $60.6 million reported in the previous quarter and down $26.6 million, or 36%, from $73.3 million reported for the same period last year.

    GAAP net loss for the quarter was $22.0 million, or ($0.69) per diluted share.   This compares to GAAP net loss of $5.7 million, or ($0.18) per diluted share, for the previous quarter and GAAP net income of $0.5 million, or $0.02 per diluted share, in the same period last year.   A major factor in the current quarter’s results was the write-down of $7.8 million of excess inventory which represented a gross margin decrease of 16.7% and decreased earnings by $0.24 per diluted share.

    On a non-GAAP basis, net loss for the quarter was $14.0 million, or ($0.44) per diluted share.   This compares to non-GAAP net income of $2.3 million, or $0.07 per diluted share, for the previous quarter and non-GAAP net income of $8.2 million, or $0.26 per diluted share, in the same period last year.  Non-GAAP adjustments for the second quarter consisted primarily of $4.8 million in amortization expense for acquired intangibles related to acquisitions and $3.1 million in non-cash stock-based compensation expenses.

    Analysts were expecting SIGM to post a loss of $(0.02) a share on revenue of $52.4 million, according to a poll by FacSet.

     At quarter’s end, SIGM’s cash, cash equivalents, restricted cash and marketable securities totaled $166.1 million, or $5.17 per share outstanding, a decrease of $13.0 million, or $0.49 per share outstanding compared to the beginning of the fiscal year.   This decrease was primarily due to payments for asset purchases for an aggregate of $12.0 million and a strategic investment of $2.0 million.

    “We are disappointed to report $46.7 million in revenue for the second quarter,” SIGM chairman and CEO Thinh Tran commented in the release.  “This sequential decrease is primarily due to the steeper than expected ramp-down of first generation set-top box deployments incorporating our IPTV media processors while certain second generation telco rollouts were delayed unexpectedly.

    “Overall, we remain heavily engaged with service providers and OEMs and are securing future business for our media processor, home networking and home control products.  We continue to invest in new technologies and are confident that our long-term strategy to build the leading connected media platform company will result in strong growth for Sigma,” Tran said.

    Source: http://www.sigmadesigns.com/uploads/library/EarningsFY12Q2.pdf

    Financial Strength (25-Aug-2011)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 4.21 2.71 2.03 0.75
    Current Ratio (MRQ) 5.19 3.31 2.60 1.11
    LT Debt to Equity (MRQ) 0.00 22.86 12.43 111.39
    Total Debt to Equity (MRQ) 0.00 44.79 22.31 150.42
    Interest Coverage (TTM) 3.57 0.96 23.36

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among six polled investment analysts. Against the Sigma Designs Inc company.

    Analyst Detail

    Buy

    Outperform

    Hold

    Underperform

    Sell

    No Opinion

    Latest 1 1 4 0 0 0
    4 weeks ago 1 1 3 0 1 0
    2 months ago 1 1 3 0 1 0
    3 months ago 1 1 3 0 1 0
    Last year 1 1 5 0 2 0

    The three analysts offering 12-month price targets for SIGM have a median target of 14.00, with a high estimate of 19.00 and a low estimate of 8.50. The median estimate represents a 65.88% increase from the last price of 8.44.

    Source: markets.ft.com

    Consensus Estimates Analysis

    # of Estimates

    Mean

    High

    Low

    1 Year Ago

    SALES (in millions)
    Quarter Ending Oct-11 6 54.40 55.63 53.00 72.65
    Quarter Ending Jan-12 6 62.32 64.59 59.88 75.33
    Year Ending Jan-11 8 286.82 288.92 286.30
    Year Ending Jan-12 6 229.79 231.96 227.10 283.01
    Year Ending Jan-13 6 262.01 277.00 249.20 299.28
    EARNINGS (per share)
    Quarter Ending Oct-11 5 -0.00 0.06 -0.07 0.30
    Quarter Ending Jan-12 5 0.09 0.14 0.02 0.32
    Year Ending Jan-11 4 1.28 1.30 1.26
    Year Ending Jan-12 4 0.20 0.33 0.14 1.08
    Year Ending Jan-13 5 0.46 0.76 0.21

    Technical Analysis

     

    Source: http://stockcharts.com

    On Wednesday, SIGM closed below its 20-day moving average. This is generally considered to be an indication of a bearish trend.

    SIGM is within its Bollinger Bands. This is a normal condition suggesting that it is neither overbought nor oversold relative to the recent levels.

    The MACD for SIGM currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Aug25-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    STMicroelectronics NV STM 6.12 5.41B 9.00 7.03 0.52 0.49
    NXP Semiconductors NV NXPI 16.07 4.00B n/a n/a n/a n/a
    Broadcom Corp. BRCM 32.69 17.49B 11.04 10.55 2.31 2.10
    Semiconductor – Specialized Median       11.97 n/a 1.39 n/a
    Sigma Designs Inc. SIMG 7.76 246.88M 51.73 16.87 1.07 0.94

    Source: Thomson Financial

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