Most tech stocks are pariahs these days, but Arnold Schmeidler, president of money-manager A.R. Schmeidler, is betting big on SpeedFam-IPEC (SFAM ), a pioneer in "chemical mechanical planarization" (CMP) systems, used in making advanced semiconductors. Now at 4.60 a share, the stock could double in a year, he says.
SpeedFam's machines, costing $3 million to $4 million apiece, yield extremely flat, smooth wafers for making advanced chips. A chip factory easily uses 20 machines, says Schmeidler, whose firm has acquired a 7% stake in SpeedFam. Its new CMP platform, Momentum, offers low-cost but superior technical capability, he says, especially in copper-wafer processing. "With 1,300 CMP machines currently in use at various chipmakers, SpeedFam could up its share of the $1.6 billion market from 10% to 30% in three years," says Schmeidler. Six of the top chipmakers are SpeedFam customers, including Samsung and Taiwan Semiconductor. Sales will ramp up fast, says Schmeidler, as the economy rebounds and as chipmakers seek next-generation CMPs.
Schmeidler figures that on July 2, SpeedFam will report better-than-expected results for the year ended May 31, 2002. Analysts expect a loss, on estimated sales of $115 million. In fiscal 2003, Schmeidler sees earnings of $32 million, or $1 a share, on sales of $150 million. Based on such growth, he thinks the stock is worth 10. In fiscal 2004, he sees profits jumping to $2 to $3 a share, on sales of $200 million to $300 million. His 24-month price target: 20.
By Gene G. Marcial