With families avoiding vacations and travel because of terrorism, some investors think tiny Singing Machine (SMD ) is a timely play. The company makes home karaoke machines. Its newest product, Singing Machine MTV STVG-700, is the first stand-alone karaoke machine that has a built-in 7-in. TV screen--where the lyrics can scroll in sync with the music. A line of CDs, with graphics featuring MTV's core music, complements the machine.
John Klecha, Singing Machine president, expects the new device, designed in partnership with MTV, to attract the younger crowd. He says the new product is a "hot item" at such retailers as Best Buy (BBY ), Wal-Mart Stores (WMT ), and J.C. Penney (JCP ).
Singing Machine, which hit 7.56 in August--soon after the new machine's launch--is down to 6 in the wake of the attacks. But one New York money manager who has been accumulating shares expects the stock to top its old high even before sales ramp up in anticipation of Christmas. He thinks the stock deserves a 15 p-e, or 22 a share, in 12 to 18 months.
In the fiscal year ended Mar. 31, 2001, Singing Machine posted earnings of $4.2 million, or 84 cents a share, on overall sales of $34.3 million. In 2002, this pro expects the company to earn $6.6 million, or $1.50 a share, on $75 million in sales. Klecha says the estimated figures "are definitely doable."
By Gene G. Marcial