Now that I have suffered through Jones Soda’s terrible earnings report I now get to look forward to Gigamedia’s (GIGM) earnings report. They will also be reporting their Q4 2007 and FY 2007 financials. Oh and by the way, I do own shares in this company. I am actually looking forward to this report though. GIGM has been a solid company for me, and I have owned their stock for almost two years now.
Many people may not have heard of this company, and that is understandable. They are an ISP (Internet Service Provider) and web portal over in Tiawan, China and Hong Kong. The official description from Reuters reads, “GigaMedia Limited (GigaMedia) is a holding company that develops and licenses entertainment software and provides application services, owns and operates an online games portal and provides broadband Internet access services through its subsidiaries.”
One of the big things the company has going for it right now is their gambling applications. Many people may want to shy away from a company that makes revenues off of gambling, thinking that it is illegal. Well, Gigamedia does not operate in the United States and is therefore not subject to the online gambling rules and restrictions of the United States. They are free to operate as they please, and their site has caught on. Everest Poker and Mahjong have been some of their top performers recently. They have also struck some deals through Electronic Arts to operate some of their online games. Such popular titles include Warhammer and Hellgate London. Most of the games that Gigamedia offers are through its subsidiary Funtown. Take a look at the Funtown site. It looks pretty interesting, although I can’t make out any of it since it is all written in Chinese.
Analysts are expecting an EPS of $.17 for Q4 2007 and $.65 for FY 2007. EPS for Q4 2006 was $.19 and .$51 for FY 2006. So, analysts are expecting lower earnings for the quarter, but higher overall for the year. I think that the stock is priced perfectly right now, especially since it has been trading in a fairly narrow range over the last three months. Personally, I am expecting them to do better than analyst predictions. Their current P/E is at 28.96 based off an EPS of $.64. If they hit the EPS of .$65 that is being predicted, we could expect the stock to climb from its’ current position at $18.50 to $18.82.
Irregardless of the outcome of this quarters/years earnings, I plan on holding my shares for some time longer, as I see this company having a lot of potential to do good things.
Update 3/17/2008: So I am pretty bummed out over what has happened with this stock over the past week. I have watched it sink from $18.50 to $14.24, a decline of about 23%. The P/E has also fallen from 28.96 to 21.98. I think that the price of this stock has been unfairly punished by the market and is due for an increase in the near future. I feel that this is an excellent buying opportunity, since price levels for this company haven’t been this low since early September. I believe that $12.75 will be the approximate bottom. This price prediction is based purely on a hunch. Based on their earnings report and the guidance that was given, I feel that their P/E should be back up where it was before, which would put the stock at the mid to high 18s.
Here is a brief technical analysis chart that I created for the stock over the past month:
I believe that the line that will be the most helpful of the three is the middle line. The most negatively sloping line is far too unattainable and measured over such a short period of time for it to be much help at all. The stock will be ready for a rebound when it crosses over the middle line by 8%. I will try to keep this chart up to date so that we can test my prediction.
