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Xebec research grant, MACom, Vuzix & PPL schedules and more ?3

11:31 21-Oct-21


Xebec is one of at least a half dozen companies to be included in a €20.1M project to design and build a low temperature electrochemical CO2 conversion system to produce sustainable fuel.  I think this should actually be characterized as a carbon capture project.  Hydrogen already has the highest energy density, but recycling carbon dioxide and methane from industrial exhaust and agriculture reduces greenhouse gas emissions and allows for current end use cases like aviation.  There are at least a few such novel efforts underway and plenty of interest from Shell and other behemoths.  XEBEF has continued its slightly upward trend, but doesn't seem much affected by this PR.

PPL Corp. has scheduled its third quarter report for the morning of November 4th.  The average of 8 analyst estimates comes to 39 cents of EPS from $1.6b of revenue, increasing to $1.9b this quarter.  I'll be looking more for updates on Rhode Island and capital allocation.

MACom has scheduled its fiscal fourth quarter report for the same morning.  MTSI is a popular stock among analysts, with well over a dozen weighing in publicly.  The average of their estimates comes to 58 cents of EPS from $155M of revenue, increasing to $159M this quarter.  The popularity is in part due to the usefulness of component innovators in forecasting the semiconductor industry, but it also fosters high valuation.  Annualizing the projections results in a forward P/E of 28.5; on a trailing GAAP basis the figure is well over 100.  I want no part of that from a current investment perspective, but I will review the call for macro notes.

Segment analysis is about more than just technology, though.  I note that SK Hynix is preparing advanced memory production while Samsung is bringing more NAND to market and also targeting DDR5 DRAM as part of its domination plans.  I think the influx of memory supply puts a clock on Intel's sale of that business to SK, and thus, that we'll see movement on Magnachip going private this year, or not at all.  We'll see if Intel has anything to say about that tonight.

Speaking of supply, ABB shares are off 6% this morning after missing by 7 cents and $500M.  Orders were up 26% but the CEO remarks that "in the current environment of a strained supply chain it is only fair to assume it includes a certain element of customers putting through safety-orders to secure future deliveries."  Consequently, actual deliveries and margins are expected to decline sequentially.  The share discount still isn't enough to interest me, but I'll keep an eye on them.

I have to wonder if the same factors will impact Vuzix, which has scheduled its third quarter report after the bell on November 8th.  The average of 3 analyst estimates comes to a loss of 13 cents per share from $3.8M of revenue increasing to $5.1M in the final quarter of 2021.  Management has announced several new distribution agreements and a few unquantified orders in the quarter.  VUZI is a third of the $30+ high it reached a half year ago, and management sold so much stock in the run up that there is plenty of operational capital.  However, even accounting for that cash, leaves the company with a P/S ration above 32.  Consequently, I think projects sales would need to more than double sustainably, or the stock price would have to be halved again, or worse, to have any hope of being purchased even at a premium price.  Thus, I will check for any surprises, but barring those, I will not write about this report.  Questions are always welcome.