Shares of technology company, Tessera Technologies (TSRA) hit a new 52-week high of $36.99 on Dec 26 and eventually closed at $36.84. The company has delivered a one-year return of about 94.3% and year-to-date return of roughly 94.4%. Average volume of shares traded over the last three months was roughly 544K.
What is Driving Tessera Technologies?
Tessera provides back-end technology for semiconductor manufacturing. The company is refocusing on the higher-margin, higher-risk licensing model, so the host of patents, new technologies and customer wins are driving growth. The product portfolio has also been revamped to target the mobile segment, which is boosting the top-line growth.
Moreover, the company gained momentum from its strong fundamentals and better-than-expected third-quarter results released on Oct 30. Since then, the stock has moved up 36.2%.
Tessera’s third-quarter earnings of 85 cents rebounded from a significant loss in the year-ago quarter and marginal profit in the previous quarter to surpass the Zacks Consensus Estimate. The company’s top line surged 150.8% sequentially and 150.5% year over year to $93.3 million, backed by both recurring and episodic revenues.
Episodic revenues increased a whopping 384.2%, while recurring revenues jumped 70.5%. The increase in recurring revenues is particularly encouraging since it reflects the company’s successful licensing efforts over the past several quarters and stable cash flow.
The price appreciation can also be attributed to the company’s recent increase in the revenue guidance for the fourth quarter ending Dec 31, 2014. Tessera now expects revenues within $58–$60 million versus the previous guidance of $50–$54 million.
Tessera has an aggressive cost cutting and restructuring strategy. The company lowered its operating expenses and redirected its investment to areas with immense growth potential. Cost savings from these restructuring efforts will act as a positive for the company. Tessera’s growth strategies, coupled with cost-control measures, delivered great value to shareholders in 2013 and is expected to do the same in 2014.
Also, Tessera has an impressive record of returning cash to shareholders through dividends and share buybacks. In the last reported third quarter, the company spent $32.4 million on cash dividends and $31.1 million to repurchase 1.4 million shares.
Moreover, the stock has seen a cumulative upward earnings estimate revision of 128.6% for the current quarter and 16.3% for the fiscal year, over the last 60 days. The Zacks Consensus Estimate for revenues increased 57.3%, while that for earnings per share jumped a significant 240.5% for fiscal 2014 from the prior year. Additionally, it has delivered a massive average earnings surprise of nearly 366.4% over the trailing four quarters.
Tessera Technologies currently sports a Zacks Rank #1 (Strong Buy).
Other Stocks to Consider
Some well-placed stocks in the technology space include Alps Electric Co. Ltd. (APELY), Analogic Corporation (ALOG) and Mercury Systems, Inc. (MRCY), with the same Zacks Rank as Tessera.
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