Bull of the Day: Rambus (RMBS) - Bull of the Day
April 17 2014 - 3:12AM
Zacks
“There’s no mentum like momentum.” I know mentum isn’t a word
but you catch my drift. When a stock is consistently hitting new
high after new high there is nothing like it. The market forces of
accumulation continually push a stock to levels it hasn’t seen
before and shareholders are handsomely rewarded. Now find a stock
that has positive momentum and a compelling earnings story during a
tumultuous stock market and you have today’s Bull of the Day.
Rambus (RMBS) is a semiconductor company that
has been around for a while but has fallen off most people’s
radars. RMBS was a darling back in the days of the dot com bubble,
trading as high as $135 before the bubble burst. Recently is has
wallowed in the single digits until the tide turned in 2013. The
semiconductor company is best known for making royalties from DRAM
licensing. Good news for RMBS is the potential for new royalty
streams from Qualcomm and Mediatek could range from $50 to $95
million per year. This would definitely be a big shot in the arm
down the road.
Rambus is a Zacks Rank #1(Strong Buy) and owes that rating to
its recent earnings surprises. Over the last four quarters RMBS has
beat by an average of 14 per share each time. Last quarter was the
most dramatic with RMBS earning 12 cents versus the consensus
estimate for a 1 cent loss. The next earnings report is just around
the corner, slated for April 21st. Recently, earnings
estimates have been revised to the upside for the current year and
next year. Current year consensus moved from a 5 cent loss to a 20
cent gain over the last 90 days. Current quarter estimates call for
a 1 cent profit per share.
The price and consensus chart calls to attention a striking
visual. Look at the where the stock price was the last time
earnings were expected to come in where they are next year. You’re
looking at the $20 level when the picture was better. If the street
gives us the same valuation, this stock could double.
From a technical standpoint the stock is a runaway train right
now. Even in the face of a market that beat down tech and small cap
over the last week or so, RMBS has managed to not only stand in but
hit new 52 week highs. Higher highs coupled with higher lows makes
this a great momentum play right now. The technicals may look
overcooked but you will often find that in a runaway breakout stock
like this. Any weakness should be seen as an opportunity to load
the boat.
Taking the move from the August 2013 low of $7.95 to the recent
high just below $12 you can see the support previously near the
23.6% Fibonacci retracement at $11. With the stock running away
we’re not concerned with retracement levels, but rather extension
levels to recognize areas of potential resistance in the future.
The 23.6% extension of the broad move implies a price target of
$12.88 in the short term.
RAMBUS INC (RMBS): Free Stock Analysis Report
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