Friday Winners: Carmike Cinemas, Solarfun, Marvell Semiconductors

Among the biggest winners in Thursday’s early trading are Marvell Semiconductors (Nasdaq: MRVL), Carmike Cinemas (Nasdaq: CKEC) and Solarfun (Nasdaq: SOLF).

Top Percentage Gainers — Friday, May 21, 2010
Company Name (Ticker) Intra-Day Price Intra-Day
% Gain
52-Week High 52-Week Low
Carmike Cinemas (Nasdaq: CKEC) $12.40 +12.3% $19.00 $5.55
Solarfun (Nasdaq: SOLF) $6.70 +11.7% $10.78 $4.48
Marvell Semiconductors (Nasdaq: MRVL) $19.53 +9.4% $22.87 $10.62
*Table includes companies with minimum market capitalizations of $200 million and three month trading volumes of at least 100,000 shares. All percentage returns are listed as of 12:22PM Eastern Standard Time. Click on ticker symbols for up-to-the-minute price quotes and percentage gain data.

This Diversified Chip Player Looks Like a Smart Play

Part of the challenge of investing in semiconductor stocks is identifying which areas will see strength and which will see weakness. At certain times, memory-related chips can see hot demand, while communications or networking chips can be out of favor. Or vice-versa. Maybe a better bet is to find stocks that have exposure to all the groups.

#-ad_banner-#One can see the benefits of such an approach by looking at the quarterly results released on Thursday from Marvell Semiconductor (Nasdaq: MRVL), which just beat analysts’ forecasts. Strong demand for Marvell’s wireless chips offset tepid growth for storage and networking chips.

More importantly, Marvell is doing a great job of keeping its product line fresh. Sales of newly-designed chips rose +35% sequentially, which enabled the company to garner premium pricing, And that spells margins gains: gross margins rose from 50.6% a year ago to 59.8% in the current quarter.

Looking ahead, a rebound in corporate spending on PCs should handsomely benefit Marvell, as the company is a key supplier of chips to the high end disk drive market. Overall, management expects sales to grow another +5% to +9% sequentially in the current quarter. The solid results and outlook are helping push shares up +9% in Friday trading.

Action to Take –> Look for analysts to push their projected fiscal 2012 EPS forecasts closer to $2 a share. The shares, trade at less than $20, could approach $25 or even $30 once the pall over tech stocks abates.


Carmike Cinemas’ Pricing Gambit Lifts Shares, but Watch Out…

Shares of Carmike Cinemas (Nasdaq: CKEC) rebounded +12% after falling for six straight sessions. Value investors may be looking for oversold stocks to pursue, but there are better opportunities than this movie theater operator. Simply put, the company is pursuing a risky game by pushing ticket and concession prices sharply higher to boost sales. This is boosting spending per customer, but some are starting to blanch at the high cost: the number of customers in the most recent quarter fell -6% from year earlier levels.

Declining traffic led Carmike to recently report quarterly results well below forecasts. That led analysts to sharply cut 2010 profit forecasts, but they left 2011 forecasts, which are sharply higher, intact. Hope springs eternal, but in this case, it’s hard to find hope for improving demand when it takes $70 to buy tickets, popcorn and soda for a family of four. That’s the price of a monthly cable bill, or four times the price of a monthly subscription to Netflix (Nasdaq: NFLX).

Action to Take –> In its most recent quarter, Carmike’s interest expense wiped out any operating profits the company was able to muster. This theater operator looks more likely to service its debt load than generate real returns for equity holders. Friday’s rebound looks like nothing more than a dead cat bounce, and shares should be avoided.


Solar Stocks Rebound

Small-cap solar stocks have been able to buck the market weakness by posting impressive gains during the last few days. As we noted a few days ago, stocks such as Solarfun (Nasdaq: SOLF) and Sunpower (Nasdaq: SPWRA) appeared to be oversold. After impressive gains on Thursday, Solarfun and Canadian Solar (Nasdaq: CSIQ) are up more than +11%, and Suntech Power (NYSE: STP) is up more than +6%.

This whole group continues to trade in an extremely volatile fashion as the negatives (a tough 2010) and positives (a better 2011 and beyond) are weighed. But shares are undeniably cheap, despite Friday’s gains, and are likely to see even more strength when the market stabilizes. As investors start to look beyond the near-term negatives associated with pricing and industry capacity, then the group could see a really strong lift.

Action to Take –> Though not for the faint of heart, solar stocks should move back into favor this summer. Sunpower looks especially appealing at current levels as the company looks set to overcome a high degree of cynicism that growth forecasts can be met.