FormFactor: Zacks’ Bull of the Day Play

The future is here. All that high-tech microchip controlled equipment of the future is now. Mobile, NFCs, autonomous vehicles, you name it, it’s here. You don’t want to get left in the dust. Stop losing money chasing the winners of yesterday and get with the times. If you want to be ahead of the game and ahead of the market you need to look at where technology is going, not where it’s been. Today I’m going to give you a little insight into the wave of the future with the Bull of the Day, FormFactor (FORMAnalyst Report).

FormFactor was founded in 1993 and had its IPO on the NASDAQ in 2003. They are the largest probe card supplier in the semiconductor industry. They are headquartered in California and have a global presence to support customers with 970 employees worldwide. They are structured for profitability with high earnings leverage in incremental revenue. Their strong and strengthening balance sheet funds accelerated EPS growth.

FORM owns a strategic position in the semiconductor manufacturing process, positioned between the front end and back end user. Their MEMS technology gives them a key competitive advantage in SoC, DRAM and FLASH memory markets.

During 2014, FormFactor sustained profitability and cash generation, demonstrated their high leverage model and gained market share. They become qualified at all three major DRAM manufacturers. They also qualified their new Vector architecture at two major NAND Flash suppliers.

It’s this improved market position at reduced cost structure that has returned FormFactor to profitability. The advanced probe card market offers an attractive growth opportunity that the company estimates as a $65 to $75 million incremental revenue opportunity through 2016.

The bullish attitude has analysts raising their earnings estimates for the current quarter and current year. The Zacks Consensus Estimate has risen from a two cent loss to a two cent gain for the current quarter and has jacked up current year numbers up from 16 cents per share to 22 cents. That bullish behavior coupled with two recent earnings surprises to the upside has this stock checking in at a Zacks Rank #1 (Strong Buy).

A quick look at the chart shows us the bullish bias has been here since November 2013. Since then the stock has moved from $5 to the $9.36 level it closed at Monday March 16. But if you’re thinking that the best is over you may be wrong. After reaching a fresh 52 week high at $10.29 to start March, the price retreated down to retest the $9 level.

Now you’ve got a stock that pulled back to the 20 day EMA and stochastics that are oversold. It’s from this oversold condition that the indicator is now giving a bullish crossover telling me that it’s time to buy again. Traders can cautiously place stops below $9 with a target on the north side of the 52 week high, giving a very favorable risk versus reward proposition.

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