AuthenTec: Another Great Quarter/Year
AuthenTec (Nasdaq: AUTH) reported their fiscal 4th quarter and full year earnings on Monday, February 4th.
Needless to say, AuthenTec did exactly what I thought they would, and even surprised me with various improvements in their business.
What follows is a brief summary of their earnings announcement.
Look for a full report on their latest quarter, and their full 2007 results, and analyst conference call highlights in a few weeks after they release their latest 10-K filings and I have a chance to parse the data fully.
Hit Me With Some Numbers
In the mean time, here are some highlights (growth from previous year’s 4Q/analyst’s estimates where applicable):
- Record quarterly sales of $15.7 million (up 67% from prior year/vs. $15.3 million projected)
- Record quarterly income from continuing operations of $1.3 million (up 328% from prior year)
- Gross margin improves to 50.0% (up from 45.5% from prior year)
- $0.04 earnings per share (up 233% from prior year/ vs. $.03 projected)
Great numbers across the board and AuthenTec showed increasing traction in their margins and pricing power.
Some other points of note:
- For the 1st quarter of 2008, AuthenTec is projecting sales of between $15-15.3 million vs. analysts estimates of $14.7 million.
- This reflects growth of 63 percent year-over-year and is more than double the year-over-year growth rate achieved in the first quarter of 2007.
- For the 1st quarter of 2008, AuthenTec expects non-GAAP earnings per share to be in a range of $0.01 to $0.02 per diluted share, compared to a loss of $0.09 per diluted share in the first quarter of 2007 vs. analysts projections of $.01 per share.
- For the full year of 2008, AuthenTec expects revenue to range between $72 million and $78 million, up from $52.3 million in the previous year vs. $73.4 that analysts are projecting.
Commented Scott Moody:
“We are pleased with our results in the fourth quarter, which reflect substantial improvements over the prior year and prior quarter,” said F. Scott Moody, Chairman and CEO of AuthenTec.
“These results were driven by the increased demand for our fingerprint sensors as well as continued improvement in margins and disciplined expense management. Over the last few years we have built a solid financial and operational foundation, while rapidly expanding sales and unit shipments.
Yet as pleased as we are with these results, we are even more excited about our future prospects since we believe we are still in the beginning stages of a billion unit per year market opportunity.
To capitalize on this opportunity, we have continued to aggressively invest in new and exciting products and technologies. In fact, during the first quarter we will introduce the AES2810, the first single chip match-on solution for the PC market, and the AES1711, a low power sensor that is ideal for the wireless device market.”
Bottom Line
While I need to listen to the conference call and read through the 10-k filing when it comes out to get better feel for everything including the cash-flow figures which were not included in the earnings release, everything else looks great as expected, and it looks like AuthenTec is firing on all cylinders.
I read that an analyst reiterated his buy recommendation on the stock, and LOWERED his price target to $15 from $16.
That’s like saying to your wife that she looks great and doesn’t need to change a thing when she asks you if she looks fat, and then getting her a gym membership “just in case”.
In other words, there is nothing wrong with the company, or its prospects, in fact they are just as good as ever, but in typical Wall Street fashion, everyone wants to be behind the bus not in front of it.
If today’s market reaction to AuthenTec’s earnings is any indication (shares were essentially unchanged while all the major indexes declined by 3%), we’ve got some pleasant days ahead.
I reiterate MY buy recommendation, but instead of lowering my price target I am still saying that AuthenTec’s shares are poised to increase in price by at least 50% within the next year, with a real chance that they could double within the next 1-2 years especially if they keep executing like this.
If you aren’t in, it’s time to get in.
Click here to read my full company research report on AuthenTec.
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Variables You Should Know: |
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|---|---|
| Risk Rating: | 7.5 (Moderate-High) |
| Position Size: | 1/4 (12-17-07), 1/4 (1-17-08), 1/4 (1-23-08) |
| Buy Around Price: | $13.50 (12-17-07), $13.25 (1-17-08), $12.00 (1-23-08) |
(2 votes, average: 5 out of 5)
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(11) comments to “AuthenTec: Another Great Quarter/Year”
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February 6th, 2008 at 12:52 am
I found your site on google blog search and read a few of your other posts. Keep up the good work. Just added your RSS feed to my feed reader. Look forward to reading more from you.
- Sue.
February 6th, 2008 at 3:11 pm
Chris, I listened to the CC and was most excited about the Atmel vs. Authentec litigation comments, as I feel this is Authentec’s only “dark cloud”
“even more optomistic”
“considering on going on the offensive”
“some recent rulings “very much” in our favor”
In your opinion, what happens to the share price as soon as Authentec gets a favorable ruling on the case?
Thanks.
February 6th, 2008 at 8:30 pm
Well, I don’t like to speculate on things like exactly what the share price will be after certain announcements, especially since Wall Street is very fickle and you never know how they will react, even to news that is seemingly good, but I will say, if this patent dispute goes away, it will bring nothing but good things not just to their stock price, but ultimately to the company, which is always a good thing.
Chris
February 8th, 2008 at 11:36 am
Why this stock AUTH keeps going down so much?
February 9th, 2008 at 12:57 am
Vedc,
Ah yes, the proverbial question that I’m sure will plague me many more times before this whole investing thing plays out!
I will be posting a blog entry in a few more days discussing this, and other scenarios, but the bottom line is this:
We are investors for the long term, not short. If you are looking for quick pops in the stocks that I recommend, then you need to look elsewhere. That’s not how I operate, or how I roll.
Why are my recommendations all down? Good question. Why is the entire market down near Bear market territory about 20% off it’s highs?
I challenge you to find many stocks that are trading higher today than they were 2-3 months ago…its all the price of doing business, and an awesome opportunity for people like us, RIGHT!, that are not scared of market factors because we’ve dug deep on the stocks we own, and understand them enough to know when a bargain is staring us right in the face.
Trust me, in 2-3 years, we’ll be having the opposite conversation: You’ll be worried that our picks are up too much, and you’ll be asking me when we should sell!
Sigh…all these problems…what’s an investor to do!
Chris
February 9th, 2008 at 9:53 am
1)Am I nuts, or has institutional ownership increased from 26%(+/-) to 29%(+/-)?
2)Am I nuts in seeing this pattern: the stock is hammered after the company reports “good” news?
3)Since average daily volume hovers near the low number of 200,000, do the 1.6 million short positions control the stock’s price trend?
February 9th, 2008 at 2:04 pm
Yo Pegleged,
1) Actually institutional ownership is much higher than that, around 75+%. Remember that the original investors in AUTH liks Harris Corp., still own sizable lots of shares, and therefore, this number is much higher, but if you take those out, then there are a whole host of mutual fund and other investors that own AUTH, but it is far from tapped out.
2) Maybe you are nuts! Just kidding…I try to stay away from patterns and trying to find them. You can get into a lot of trouble doing that.
Instead, let’s focus on the overall picture: Did anything significantly change at AUTH after this earnings announcement? If anything things were reaffirmed and things are not only on track, but better.
Let the sellers sell, that’s fine with me, it only makes my job easier plucking shares at lower prices and will make me look really good at some point in the future.
3) That could be a small part of it. You see the whole semiconductor industry has been getting creamed lately, and unfortunately, AUTH has been unfairly taken down with them. This could also have to do with some additional short selling, but from the stats that I saw, the actual % of shares that are short is LESS this month than last month, so I don’t think this has been a large factor.
Again, let them short, that’s cool for us as they will have to cover their positions as AUTH keeps introducing more and better products, and kicking butt on earnings as they did this quarter.
Everyone needs to relax…look at this not as something wrong, but as a buying opportunity! I never thought that AUTH shares would ever go below $13 ever again!! They are almost near $11, which is their IPO price!
I am seriously considering adding to my position here with the final 1/4 buy if it dips much lower. You should be thinking the same.
Chris
February 10th, 2008 at 9:25 pm
While the conference call was good, the CEO did make a point of saying that earnings should be relatively flat the next quarter or two because of normal seasonal patterns (computer manufacturers ramp up their new models in the second half of the year) and because a big customer is shifting from one Authentec sensor to another (and buying fewer in the interim I guess). So perhaps owners looking for rapid acceleration in earnings or big new deals are bailing out.
My biggest concern with Authentec is how they stack up to the competition — Dell uses sensors from Upek, for instance, and I recently saw Upek sensors installed at a local grocery store, which makes me wonder if Authentec is really as far ahead, technologically speaking, as they claim.
February 11th, 2008 at 2:16 am
Michael,
Yep, you are correct, that could be why the stock has sold off.
“Slowing” growth might not be good enough for the momentum players, but to be honest, I don’t want them in my long term stocks anyway.
As far as Upek goes, good call. I’ll have to take a look more in depth at their company, and see how they stack up with AUTH.
What I do know is that AUTH has patents on their sensors and the software that goes with it, and that no one’s sensors measure in the same way, so I’ll do some digging around and see what I come up with, thanks for the heads up.
Chris
March 13th, 2008 at 5:43 pm
What is your opinion on the recent insider selling and the recent slide in price. It appears to be heavily oversold or is there other factors affecting the price. It looks to be another great buying oportunity.
Rick
March 13th, 2008 at 6:56 pm
Rick,
I know it can be super frustrating for a company that you own to decline so precipitously without any real news to explain the downturn.
There has definitely been some insider selling, but not as much as you would think.
Harris corp has definitely been divesting their shares recently in small chunks (50-100k shares at a time), but they still own 3-4 million shares.
I will be coming out with a more detailed analysis of AUTH and their latest 10-k and valuation metrics, which will show that at the current price, AUTH is probably a fair value, but not yet oversold. This is why I put AUTH shares in my “hold” pile for now, and am not looking to add any new money to the issue yet until more time goes by, and they continue to execute, which I see no reason why they shouldn’t.
If you own shares, keep them, if you don’t wait.
Chris