Thursday, May 28, 2015

Seeking Alpha: Can FormFactor Drive More Fitting Margins?

If you're looking for pick-and-shovel stories in the semiconductor space, you may want to think about probe companies like FormFactor (NASDAQ:FORM) and Cascade Microtech (NASDAQ:CSCD). While the equipment made by the likes of Applied Materials (NASDAQ:AMAT) and ASML (NASDAQ:ASML) is indeed critical to the manufacture of chips, semi conductor capex is notoriously cyclical and the industry has become even more unpredictable as clients increasingly look to re-use equipment. With companies like FormFactor and Cascade, though, you're talking about a model more similar to semiconductor consumables and businesses that are leveraged to actual wafer starts for their revenue.

FormFactor has work to do. The company is the largest supplier of probe cards to the industry and has very strong share in SoCs, but the company hasn't been able to generate the sort of margins that other semiconductor consumable companies and more direct comps like Micronics Japan and Cascade have delivered. The company seems to be on a better trajectory now and there's upside if FormFactor can outperform, but the shares already seem to price in a reasonable amount of self-improvement.

Read more here:
Can FormFactor Drive More Fitting Margins?

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