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Spreadtrum Communications Sinks on Lowered Sales Outlook

SPRD is testing support at the $15 level

by 2/29/2012 1:45:49 PM
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Following a number of notables into the earnings confessional this morning, Spreadtrum Communications, Inc. (SPRD - 15.10) said its fourth-quarter profit rose to $35.2 million, or 66 cents per share, from last year's profit of $30 million, or 56 cents per share. Excluding items, earnings arrived at 78 cents per share. Revenue soared 51.9% to $192.2 million, thanks to market expansion into the 3G segment. The results came in above expectations, as analysts were calling for a per-share profit of 71 cents on $190.7 million in revenue. Pricing in a lower seasonal demand, SPRD is calling for current-quarter revenue to land between $158 million and $163 million, below the $172.1 million in sales forecast by Wall Street.

Like sector peer Marvell Technology (MRVL), SPRD has taken a tumble post-outlook. At last check, the stock is down around 11%, adding to its 18.7% year-to-date deficit. Further highlighting the security's technical struggles, during the course of the past 60 trading sessions, SPRD has lagged the broader S&P 500 Index (SPX) by nearly 40 percentage points, on a relative-strength basis. The equity has managed to find a foothold atop the $15 mark -- a level that has recently served as a layer of support for SPRD.

Price Chart of SPRD

With troubles on both the fundamental and technical fronts, the wireless chip maker finds itself holding a mixed bag of sentiment. Zacks reports that six analysts maintain a "buy" or better recommendation toward the stock, compared to one single "sell" suggestion. Also, the average 12-month price target of $28.20 -- as calculated by Thomson Reuters -- represents a brazen 66% premium to yesterday's close of $16.96. What's more, SPRD has not closed above $28 on a daily closing basis since Nov. 16.

Elsewhere, despite short sellers reducing their exposure by 32.3% over the past month, short interest still accounts for 9.9% of the stock's available float.

SPRD could be poised to encounter some contrarian-related headwinds in the short term. Should the stock continue to struggle on and off the charts, any downgrades and/or price-target cuts from the brokerage bunch may encourage short sellers to double down, moving the security south of the supportive $15 neighborhood.

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