Chart watch - TMTA

C

Chagi

I've been watching TMTA closely since my last trade in early August.

Stock has been showing falling tops recently, interim support around $1.35, but I'm expecting the stock to break downwards soon.

The odd thing about the stock lately is that I'm actually quite bullish right now on TMTA from a fundamental perspective, they are a significant turnaround story (I'm also extremely curious to find out what the proprietary secret project that they are working on for Microsoft is...), but the current look of the chart is keeping me from initiating a long position.
 
Not the reversal i had in mind. But i think that 1.35 was as low as we'll see it coming into earnings. Should be interesting to see what kind of numbers they post as i think .04 is guaranteed...... However, they haven't announced any new fabs which makes their growth prospects somewhat limited right now. Don't expect to see $2+ untill they announce another coupel fabs.
 
Quote from Grew:

Not the reversal i had in mind. But i think that 1.35 was as low as we'll see it coming into earnings. Should be interesting to see what kind of numbers they post as i think .04 is guaranteed...... However, they haven't announced any new fabs which makes their growth prospects somewhat limited right now. Don't expect to see $2+ untill they announce another coupel fabs.
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I'm not quite sure what you mean by "new fabs" Grew?

As far as I know TMTA has always been a fabless company, they sub out fabbing of their chips. More recently TMTA decided to move away from chip production/sales and focus more on a licensing/royalties business model. While they are holding onto their 90nm Efficeon tech, they are in the process of selling off the production rights for their 130nm Efficeons and the older Crusoe to Culturecom (in China).

Growth for Transmeta would come from royalties from existing licensees for their low power tech, as well as signing new licensees, plus the Culturecom production royalties (assuming that the deal goes forward). I'm very curious to find out what the secret Microsoft project is though...

As for future earnings, management is currently playing things very conservative, I believe the best they've offered at this point is to state that next two quarters (including current quarter) will be cashflow even.
 
Their licenses are based on the revenue generated from the fab's that NEC/Sony etc. use in their implementation of TMTA's LR2 technology.

A new licencee would need to use LR2 in a fab in order for TMTA to potentially genereate more royalties.

With that said, the PPS is about what i would deem as a "fair" valuation (in my own estimates) based on their current licensee's w/no growth prospects.

My investment strategy is based on this underlying theory that growth is impossible to estimate and therefore assumptions make an ass out of you and "umption", I like TMTA because using a 0 growth assumtion (which is hogwash... this company has amazing growth prospects) they are fairly valued.

However, I tend to shy away from companies that I grow attached to. I've been in this company since the .60s and .70s and sold 90% of my position around $2.00. Because of my/their success I have a large bias towards them. Emotions are not welcome in my investment strategy so I have a miniscule position right now and no intention of adding on.

P.S. Good call on the support level. Looks like 1.35 was a pivot.
 
Good points. I've been following TMTA in detail for a little over a year now, and they have come very far indeed with their turnaround story.

I share your frustration when it comes to predicting earnings, unfortunately that has always been a serious issue while following TMTA for the past year. Most companies tend to have quarterly growth trends, seasonality, year over year growth, etc. to them, but because TMTA is currently in the process of signing up licensees, the cashflows are volatile. Heck, even their own auditor raised concerns about TMTA continuing to be a going concern, yet just a few months later they went cashflow positive.

I've put quite a bit of thought into the Microsoft project that TMTA is working on, but it's difficult to determnine what's going on with any accuracy. I believe that TMTA management has stated that they don't do engineering services for just anyone, it has to involve either licensing of their low power tech, or use of their products.

Judging by the fact that TMTA has chosen to hold onto their 90nm Efficeon, my best guess is that Microsoft is working on a future product that uses the processor. Could be the whole "fanless media center" concept from early 2005, could be Microsoft preparing to launch a handheld gaming device? Your guess is as good as mine.

I can just imagine what the stock would do though if a MS product that uses TMTA tech were to be announced...

In terms of valuation, if the company could manage EPS of $0.04 per quarter, it would likely justify share prices of $4 to $5, but I think that investors are waiting for more numbers before they start to be more bullish on the company.

By the way, I did pretty well on my TMTA trade as well around the same time as you, bought 0.96 Aug 3, sold $2.11 Aug 17, definately not an average/normal trade for me.
 
TMTA is starting to look interesting again.

Stock went for a big run around the time of August earnings, has since been gradually declining, but appears to have leveled out around $1.25. Ideally one would wait for confirmation of beginnings of upwards move, but I opted to open a long position Monday of this week.
 

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Update - still holding my long position.

In retrospect, I don't feel that I timed this trade very well, would have been lower risk to buy once an uptrend develops.

That said, I'm going to continue to monitor the stock closely next week, earnings announcement should be in early November....
 
Update - TMTA made a nice upwards move today, going to monitor closely tomorrow, hoping to see continuation. Looks like it could be starting to breakout upwards, optimism in the stock improving.

As I mentioned previously, should have ideally waited for some upwards movement before opening my position, but today's action looks promising.
 

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