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A look at Rambus Inc.

Submitted by WSN_Staff on Sun, 06/14/2009 - 12:03.
in
Rambus Inc.

Rambus Inc. (NASDAQ:RMBS) is being called the 'the Next 27 Bagger' by a blogger on SeekingAlpha.com.  Could this guy be right or just a trader hoping to find some more buying interest to boost his holdings? 

Here's the most important points from his article:

On June 8th, when Rambus was at 14, I shared an article
with Seeking Alpha readers telling you that RMBS was about to make a
run. Less than a week later the stock is now in the mid 17s and headed
higher. As recently as February 20, 2009, just 4 short months ago,
Rambus stood at $6/share. Is it even remotely possible that Rambus
could be a 27 bagger in a year like Qualcomm was in 1999? That would
mean Rambus has to get to $162/share by February 19th 2010.
The surprising answer to this question is yes. While it may take Rambus
two years to get to that level, it certainly is possible that Rambus
could be there in 8 months.

How can that be?

First, you don’t have to believe an anonymous internet poster (NukeJohn), even though I have given you recent predictions on TSRA and TIVO
that have come to pass. In 1999, there was a fund manager (Kevin Landis
of Firsthand Capital Management) that picked QCOM as the tech stock of
the year and guess who he picked as the tech stock of the year in 2009?
You guessed it: RMBS. Watch the last minute of this 4 minute video.

How can Rambus possibly have the potential to be a $162 stock

...

Rambus has lowered their royalty demands, but when they start getting
paid on all the products that have DRAM, even these lower royalties
will justify a price well into to triple digits. Rambus may never be
the $1000 stock that Fred Hager talked about, but it could easily be
$300-$500 in 3 years.

...

 

Although I was initially disappointed with the rates, I now see
the brilliance of this strategy being executed by Rambus. The part I
like best is that the 5 year licenses the DRAM manufacturers will be
forced to take stretch out four years after the F/H patents expire.
Long before then, the DRAM market will transition to DDR4/XDR2, where I
believe Rambus will be getting paid 4 to 5% royalties.

Rambus should soon be at $35-40/share. I would not be surprised to see a run similar to the run in January 2006
when the stock went from 16 to 36 in 11 trading days. I am raising my 3
month price target to $45 and my 1 year price target to $120.

While we may not quite repeat QCOM's 1999 performance, Rambus will still be one helluva investment over the next year.

Disclosure of Blogger: Long RMBS, TSRA, TIVO; Short MU

 

Recent analyst take on Rambus:

12-Jan-09 Reiterated BWS Financial Buy $25 → $20
27-Mar-08 Reiterated BWS Financial Buy $25 → $35
05-Mar-07 Reiterated Am Tech/JSA Research Buy $32 → $34

 

 

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