Fast-growing Singing Machine (SMD ), big in making home sing-along karaoke machines, is staying with the beat. So why is its stock down? From 19.14 on Mar. 21, it has fallen to 10. The company was first featured in this column on Oct. 8, 2001, when the stock was at split-adjusted 4 a share. The depressed market is one big reason. Another is pressure from the shorts. Singing Machine President John Klecha, who will soon take over as CEO, says short-sellers are spreading rumors that inventories have been rising because of sluggish sales of some products.
Wrong, says Klecha: The inventory build-up is deliberate--in response to a flood of orders. Already this year, orders worth $90 million have come in. In the current fiscal year, ending Mar. 31, 2003, Klecha expects sales to double from last year, to $120 million. And earnings per share, he adds, should jump from last year's $1.02 a share to $1.60 or $1.70.
Dan Weiskopf, managing partner at MH Capital, who owns shares, predicts that Singing Machine will exceed those estimates "quite easily." He says Singing Machine has become a sophisticated marketer, with strong links to major outlets, including Best Buy (BBY ), Circuit City (CC ), and Target (TGT ). He sees the stock doubling in a year, based on rapid earnings and sales growth rates.
By Gene G. Marcial