Another Chart for TC to comment :)
Report fm GKGoh dated 25-April here
Report fm OCBC dated 22-April here
Report fm Kim Eng dated 22-April here
All 3 recommended SELL when the share price was $16+. OCBC stated a fair value of $14, which is the Book Value. Kim Eng had a 6-mth tgt price of $12.50.
Comments : I am not vested here but am looking to buy some Creative shares. However, as there's been a change in Creative business strategy, to focus on MP3 business, I have put that on hold. Reasons being their MP3 business is not growing (stagnant at 2Mil sets for last 2 Quarters), Low Margin (3%+ vs 15% previously) and Large Inventories (2mths) buildup. I'll wait for their next Quarter results for directions.
3 comments:
Today closed at $12.90.
Obvious downtrend, I also looked up the yahoo charts, volume also low. 20day MA and 100 day MA down.
If there is a cheap put option, this would be good,haha!!!
I am not following this stock because I do not have the risk profile for this kind of stock :)
I think the support level would be at its fair value but its fair value is subjective. I am more conservative, I would take out all its goodwill and investments.
Need to check.
If you interested, look at its volume and MA before jumping in.
Safer.
SINGAPORE (Dow Jones)--Shares of Creative Technology Ltd. (CREAF) plunged 9.6%during early trade Tuesday on overnight news that the company reduced its fiscal fourth-quarter guidance for revenue and gross margin, citing weakness in its MP3 player segment.
At 0636 GMT, Creative was down S$1.20 at S$11.30. Its share price has fallen 53.6% this year, touching a new 52-week low of S$11 in the early session.
The cut in guidance confirmed the markets' fears that the company's recent MP3 player price cuts would force Creative into the red during the quarter.
The Singapore company's MP3 players, sold under the MuVo and Zen brands, are a distant No. 2 to Apple Computer Inc.'s (AAPL) iPod.
The consumer-electronics maker late Monday said it expects revenue for the quarter ending June 30 to rise 50% on year to about US$300 million. It had earlier projected a 65%-80% increase to US$330 million - US$360 million. Gross margin for the fourth quarter is expected to be below 20%, down from its April guidance of 22%-24%.
Based on the lower revenue and gross margin guidance, the company projects swinging to an operating loss for the period. In the year-earlier period, the company reported net income of US$6.6 million, or 8 cents a share, on revenue of US$201.8 million.
For the third quarter ended March 31, Creative's revenue rose 65% from a year earlier to US$333.8 million, a record for the period, largely due to a fourfold increase in MP3 sales.
OCBC Securities said Tuesday in a note that it will be reducing its forecast numbers and fair value of the stock "to reflect the much worse than expected upcoming results for Creative. We will also likely factor in some level of inventory write-off, due to the lower than expected sales, in a retail environment where product refreshment cycles are extremely short," it said, adding that its "Sell" rating still holds.
In a recent Dow Jones Newswires survey of 10 analysts, five had a "sell" rating on Creative, others had ratings like "fully valued," "underperform" and "neutral." Analysts polled had targeted share prices that ranged from S$8.90 to S$16.70.
Also, as reported, BNP Paribas Peregrine Securities Ltd. said in a recent research report that it forecasts a fourth-quarter loss of US$900,000.
Creative is currently facing considerable pressure on prices. A spate of price cuts by Apple earlier in the year prompted Creative to reduce the price of its five-gigabyte Zen micro MP3 player to S$398 from S$448 last year.
Late last year, armed with a US$100 million advertising budget, Creative seemed reasonably optimistic about duplicating Apple Computer Inc.'s (APPL) success in the digital music player market - even though few analysts at the time shared that optimism.
Creative has spent around US$20 million-US$25 million of its budget, according to estimates by two brokerages, but it is still trailing behind Apple.
At present, Apple has 54% of the global MP3 player market industry while Creative has around 10%. In the just-ended third quarter, the MP3 player business contributed 68% of Creative's revenue.
The company is listed on the Singapore exchange and the Nasdaq. Creative closed Monday down 11% at US$6.64 on the Nasdaq.
Current situation reminds me of their foray into the CD-ROM Drives mkt many years back. They wanted to develop and sell their own Drives at that time when CD-ROM was becoming a popular storage. What happened was technology moved too fast (1x, 2x, 4x, 8x, 16x, 24x, 32x,.. speed Drives) for them, many Korean and Taiwanese competitors appeared in the mkt and Creative ended up with a lot of inventories that needs to be written down or off.
Unable to compete, as CD-ROM Drives had became a low margin commodity-like product with many strong competitors, Creative finally changed their strategy. They engaged one of the Korean maker (Samsung, I think) as ODM for the CD-ROM Drives. Creative also switched to bundling (Drives + SB) which gave them better margins and they finally recovered fm their losses. Took them a few Quarters, tho'.
Hopefully, Creative is able to react faster this time round and recover fm the current losses. I don't expect the share price to recover any time soon unless they are able to come out with a recovery plan fast. Any price rebound should be used as an opportunity to sell.
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