Our first idea is a company’s whose earnings estimates have been boosted by six analysts in the past 30 days, with estimates increasing $1.28 a share 30 days ago, to $1.66 today. Our second recommendation is a partial sale of a previous idea.
Smart Global (SGH)
From Cabot Top Ten Trader
Smart Global Holdings (SGH) specializes in memory, storage and hybrid solutions, including DRAM- and FLASH-based storage modules. This has been a hot market as demand is high and supply is tight.
The company has significant exposure to the Brazilian market, where it derived 67% of revenue in the last quarter. As the only large provider in that country, Smart is capitalizing on Brazilian demand for smartphones, desktops, notebooks and servers.
The stock is doing well because growth has been off the charts. Revenue over the last four quarters has expanded by 38%, 53%, 67% and 83%, respectively. Given the trend, analysts see Smart Global’s sales growing by 64% this year, with EPS surging by 175%, to $6.21. These are monster numbers suggesting this industry is still booming.
As always with these cyclical stories, investors need to keep an eye out for signs of easing demand; the turning points for memory products can come quickly. But with Brazil’s economy continuing to recover, and Smart’s management forecasting DRAM prices going up through the first half of the year, the bulls remain firmly in charge.
Buy Range: 46.5 - 49.5
Loss Limit: 42 - 44
Michael Cintolo, Cabot Top Ten Trader, www.cabotwealth.com, 978-745-5532, April 2, 2018