Rash, Flash and free cash flow...the road to $200Most semiconductor companies use what is called a 4-4-5 calendar. In terms of months out of the year, there are four weeks in the first two months of the quarter and five in the third. The SIA uses a three-month moving average as a "smoothing technique" to avoid confusion when looking at the data in terms of single months, which makes the data look distorted with huge drop-offs in sales during the first month of the quarter and sales spiking back up in the third month. https://www.semiconductors.org/faq/questions/?print=y I bet most of you out there either dont know or really don't care about free cash flow and the free cash flow or EBIDTA, that POET will most definitely create. Probably you dont give a flyin f-ck either about anything other than your $70 a share.I think then if you are in these categories, you should learn the basics, then you may understand what and why I talk in the multiple three figures for share price.
So a quick crash course, then I will show how i arrived at my numbers. Oh....and one disclaimer, don't send me stupid remarks on PM please. I know that this is a very rough and dirty calc. I also know its not something we use in our companies to great extent and for a few reasons. What it does show is future potential. One last item, I will use basically consumer electronics sales figures for the basis iof my calcs, commercial, industrial and many other industries don't have or share really accurate or up to date numbers much of the time through their industry associations. So the values at the bottom are based strictly on consumer goods and a healthy discount on all calcs. to be conservative for the henny pennies out there.
EBIDTA........
https://en.wikipedia.org/wiki/Earnings_before_interest,_taxes,_depreciation,_and_amortization Valuation..........
https://www.investopedia.com/articles/fundamental-analysis/11/present-value-free-cash-flow.asp https://www.fool.com/investing/beginning/how-to-value-stocks-cash-flow-based-valuations.aspx VARIANCES I have used variances here to again, distribute the numbers conservatively. We don't really know or understand as yet what all the markets, products uses wil be for the asset. So again, this is a
bit of an estimation project. Don't shoot the messenger for the free DD. Even its skewed slightly. OH..........and "if".......your a basher, you go right onto the stupid switch because I have no time for contrary arguments with no basis in fact. But if you have dispute, by all means come at me.
NUMBERS https://www.ce.org/News/News-Releases/Press-Releases/2013-Press-Releases/CE-Industry-Revenues-to-Reach-Record-High-of-$208.aspx
208 Billion The forecast projects that new, emerging product categories will grow by 107 percent year-over-year in 2014. These new technology categories, including 3D printers, Bluetooth wireless speakers, convertible PCs, health and fitness devices, smart watches and Ultra HD television displays, are cumulatively expected to contribute more than $6 billion to the overall CE industry in 2014. While these emerging product categories represent less than three percent of the entire CE industry, they drive 65 percent of total industry revenue growth. “We are at the forefront of a momentous wave of innovation,” said Shapiro. “The incredible growth that emerging product categories such as Ultra HDTV, wearable electronics and 3D printers will experience this year underscores the significant role new technologies play in the total consumer electronics story. Sales of mobile connected devices, specifically smartphones and tablets, will continue to contribute significant unit sales and revenue to the total CE bottom line in 2014. Although revenue growth has slowed, unit sales will continue to see steady increases. - Smartphones are expected to maintain their position as the sales leader of the industry in 2014, with unit shipments projected to reach 152 million this year, up from 138 million units sold in 2013. Additionally, smartphone revenues are expected to generate $41 billion in 2014, a 4.6 percent increase from $39 billion in 2013.
- Unit sales of tablets are projected to reach 89.3 million this year, up from 77.4 million in 2013. Revenues for tablets will reach $27.3 billion this year, up by three percent.
Bright spots within the television category will help drive revenue growth this year, as larger screen sizes and innovative display features have consumers upgrading their video experience. Although, total unit sales of displays are predicted to remain even with 2013 levels, total TV sets and display sales are projected to reach $21.3 billion in 2014, up two percent from 2013’s better than expected revenue level of $21 billion. - LCD flat-panels continue to dominate the total number of sets sold each year. Both unit sales and revenues for LCD displays are projected to increase slightly, with 39 million LCD TVs expected to ship to dealers in 2014, resulting in $19 billion in revenue.
- Innovative features such as Ultra HD and OLED within the display category are beginning to gain awareness. Unit shipments of Ultra HD displays are expected to surpass $1 billion for the first time this year, while OLED displays will reach $836 million.
Elsewhere in the industry, a number of other categories are expected to see positive growth in 2014, including: - Audio: Soundbars, headphones and Bluetooth wireless speakers remain the standout products of this category. Soundbar shipments are projected to increase 22 percent to 3.5 million units and reach $676 million in revenue. Headphones are expected to sell 71 million units, earning $1.5 billion in revenue; while Bluetooth wireless speakers are expected to generate $430 million in total revenue in 2014, an increase of 12 percent year-over-year.
- Automotive electronics: The growth of new vehicle sales in 2014 will drive factory-installed systems to reach $11 billion in revenues, an increase of 20 percent.
- Electronic gaming: The release of next generation gaming consoles are projected to propel unit shipment growth, up 42 percent year-over-year, to reach revenues of $5.7 billion in 2014.
Ok so........how did i do it you ask. We established an average percentage of cost to manufacture the product using an assumption of one POET chip per product. We scoured the net (results below) for an accurate cost analysis and basically due to confidentiality issues (we suspect) could not find exactly what we were looking for. We established the average cost to the manufacturer of a consumer electronic device of a POET chip at $4.47. Now there evidence that this is way too low and certainly argument for it being to high. However, we went with because its the best we could resolve using our calcs from old data.
Then we took all of the consumer electronics data we had (some shown above) and came up with an approximate unit total of POET enabled devices. Argument could be made that they all could have a POET chip certainly, but for now we sub segmented the consumer section of the tech industry for a few reasons, including conservative ones.
So we took 1.8564 Billion Consumer Electronic Units with a POET product. Again, just consumer electronics, no commercial, industrial or other tech products.
6.4 Billion revenue Now whats the margin of costs/profit ? Again subject to severe confidentiality. So we used a figure of
15%....... from some fab articles and hypotheticals ground out of industry articles.
960,000,000 Million in after tax cash flow.
Divided by approximately
210,000,000 O/S shares.
Equals out to
$4.57 a share, after tax earnings which is a huge return on equity, capital, and hard costs. Next we took a representive sampling of PE ratios across the industry, allowing for industry specific mulitples. An average PE will be in 20's while a very high average (expect POET to be up there due to ability to generate excess gobs of cash with low cost and no debt) is 90-100. So we split the difference and used 50 as a constant. Again ONLY consumer electronics sector numbers are used here.
$4.57 x 50=$228.57/shr Ok so whats its it going to be when you add in all the other industries, new products and uses, and/or a higher market share, and/or PE multiple ?
Kind of makes the old $70 club look a little sallow ? So over the next days and weeks, stop thinking about all the negatives (all what negatives ?) and think "free cash flow". The analysts, fund managers, hedge fund heads, sovereign and pension fund managers will be busting their necks to get a position here. Knowing full well what cash generation translates to on the balance sheet. Knowing they need 5% a year to keep shareholders, unit holders, investors happy. Frankly I dont see a plethora of those opportunities out there to that segment........do you ? Sources>>>>>>>>>>>>>>> https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CEwQFjAB&url=http%3A%2F%2Fsmithsonianchips.si.edu%2Fice%2Fcd%2FCEICM%2FSECTION2.pdf&ei=JKHeU5SZBuLTiwLHqoD4Dg&usg=AFQjCNF7RoFvzkByEUFrG_abTYT0DKAfcw&sig2=o0I0PeBZ4OB5aMmWgzFiQQ https://en.wikipedia.org/wiki/Semiconductor_fabrication_plant https://www.eetimes.com/author.asp?doc_id=1265878 https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CCsQFjAB&url=http%3A%2F%2Focw.mit.edu%2Fcourses%2Fengineering-systems-division%2Fesd-290-special-topics-in-supply-chain-management-spring-2005%2Ftools%2FSemiconductorCostModelvFinal.xls&ei=3J7eU4T-NeHKiwLQ3oCgBg&usg=AFQjCNFU41z-B6CaPL6N8cCKkjwTvI4q7w&sig2=Asn0cQlFeEQTg2Tch6vixQ https://spectrum.ieee.org/semiconductors/design/the-new-economics-of-semiconductor-manufacturing
https://www.ledsmagazine.com/articles/print/volume-6/issue-6/features/web-exclusive-semiconductor-supply-chain-sees-big-potential-for-cost-reductions-in-led-manufacturing.html