Freescale Semiconductor (FSL)
From Cabot Wealth Advisory 3/13/14 Sign up for Cabot Wealth Advisory—it's free!
One name I’m watching is Freescale Semiconductor (FSL), a huge chipmaker that produces chips for a variety of end markets (although auto is its largest). This is not a classic growth stock—it’s a good-sized company ($4.2 billion in revenue) that went private years ago, but came public again in 2011 loaded with debt and with business entering a downswing. Thus, FSL is more of a turnaround play ... but it’s one I think could have an outstanding run.
Shares did a whole lot of nothing for years, but just a month ago, the stock exploded out of a nice-looking consolidation. The catalyst was initially better-than-expected earnings (sales up 13% was the fastest growth rate since early 2011, and Freescale now has three straight big quarters of earnings), and then, a successful share offering that will dramatically cut its debt load and interest expense. It also helps that management was very optimistic, telling analysts that profit margins and the firm’s market share should continue to expand.
The end result is that FSL has great earnings estimates ($1.37 per share this year, up 204%), and $1.87 in 2015, up 36%) and staged a monstrous-volume breakout and advanced from 18 to nearly 24 in just four weeks. Now the stock is at least calming down, though it hasn’t been able to pull back much.
Given the volume on the advance, my guess is that, barring a market meltdown, FSL will have trouble pulling back farther than 20 or 20.5, which is where that huge volume gap occurred in mid-February. Thus, I view any weakness as buyable, and given that the stock only recently exploded out of an initial-stage consolidation, FSL could have a healthy rise for many months (again, market-dependant).
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|Freescale Semiconductor (FSL)
6501 William Cannon Drive West
Austin, Texas 78735
|Index Membership: N/A
Industry: Semiconductor - Broad Line
Full Time Employees: 16,800