Cramer Likes Tessera Technologies (TSRA)

Tessera Technologies (TSRA) is a relatively small semiconductor company based in San Jose, California. The company liscenses its IP to other Tech companies needing miniturized chips sets to fit the ever-shrinking gadgets. The company was featured on Tuesday night’s Mad Money with Jim Cramer as he discussed why he likes the stock more now, after a sizeable run up, than he did at lower price levels. Indeed the stock has recovered from very low levels after an unfavorable International Trade Commission ruling in November 2008 that dropped the stock by about half. Tessera is up nearly 80% since the beginning of the year, as the ITC recently ruled in its favor over a patent dispute with Motorola (MOT) and Qualcomm (QCOM) among others. The ruling will provide Tessera will millions in licensing revenue, and with only 48 million shares outstanding and fewer legal fees into the future, this will provide a nice boost to EPS. The current earnings estimates call for EPS of $1.09 placing the current P/E at 19, but this should come down as estimates begin to factor in the added licensing revenue.

“…Sometimes a stock can become a better buy and a better value after it’s had a big run. And I’ve got one. I want you to take Tessera Technologies,TSRA. This is another speculative tech stock like those I’ve been recommending for weeks. Since I believe the next leg of the tech rally, which started today, with Apple up $8, will now provide further upside.” CNBC’s Mad Money 5/26/2009

When you add the benefit of a favorable IP dispute to a company that is already profitable and has an immaculate balance sheet, the upside potential can be great. The balance sheet has no long term debt to speak of, a current ratio of 5.6x, and an unbelievable $7.50 per share in cash and equivalents. Considering Tessera stock was trading in the mid-$40s just a year and a half ago there could still be plenty of upside potential.

At Ockham, we were positive on the stock prior to the ruling with our Undervalued valuation and will continue to be at these price levels. Cramer was quick to point out that this is a speculative call because of the size of the company and the rapid appreciation in shares, but according to our valuation methodology this spec play has a lot of value as well. Sales growth has continued to be impressive, even through the downturn in the economy and the long term trends in gadgets seems to favor any chip maker that can continue to make them smaller and faster. With the legal battle won, the company has become more aggressive as they announced completion of the acquisition of Dblur Technologies, an Israeli company that makes Camera lenses.

Cramer and Ockham Agree on Tessera Technologies

About Ockham Research 645 Articles

Ockham Research is an independent equity research provider based in Atlanta, Georgia. Security analysis at Ockham Research is based upon the principle known as Ockham's Razor, named for the 14th- century Franciscan friar, William of Ockham. The principle states that a useful theory should utilize as few elements as possible, because efficiency is valuable. In this spirit, our goal is to make the investing environment as simple and understandable as possible, yet no simpler than is necessary.

We utilize this straightforward approach to value over 5500 securities, with key emphasis given to the study of individual securities' price-to-sales, price-to-cash earnings and other historical valuation ranges. Our long term value investing methodology is powered by the teachings of Ben Graham and it has proven to be very adept at identifying stock prices that are out of line with fundamental factors.

Ockham Research provides its research in a variety of forms and products including our company specific reports, portfolio analytics tools, newsletters, and blog posts. We also offer a white labeling research solution that can give any financial services firm their own research presence without the time and cost associated with building such a robust coverage universe of their own.

1 Comment on Cramer Likes Tessera Technologies (TSRA)

  1. I just love how the CEO of Tessera was on Cramer’s show talking about monolitic CMOS cameras when the only company out there that has product and is actully shipping them today is OmniVision Technologoies and their Camera Cubes. Which BTW has nothing at all to do with Tessera.
    Shame on you, Cramer for being a party to this farce.
    Tessera isn’t even a semiconductor company small or otherwise as is stated, they just try to be an IP company. Tessera makes nothing, can make nothing but hot air and it is nothing but an empty bag.

Leave a Reply

Your email address will not be published.