|I think too many areas of SIMO's business lack "stickiness" for SIMO to get a high PE multiple.|
For example, Shannon may be high growth, but they have one massive customer - Ali Baba. Lets say Ali Baba drops them. Then Shannon's business shrinks quickly (unless they get some replacement). Also, ~30% of sales are eMMC controllers through one company - SK Hynix. Lets say SK Hynix makes their own controller in future eMMC products (UFS 2.1 and beyond) or chooses some startup to make them. Then 30% of SIMO's business enters decline.
There are too many segments in SIMO where one customer is massive for SIMO to get a nice 23x speculative PE. Lose that customer, and boom, it's a disaster.
That's my main guess why SIMO doesn't get a higher PE. So....its more of a "show me" stock than one where the shares will predict future greatness (with a high PE).
I have to admit I don't completely understand it. I don't think it's that hard to make a NAND controller, so I don't know why other semi companies (other than MRVL) don't seem to make them, and I don't know why other NAND makers (outside of Samsung) don't make more of their own controllers. SIMO says they have deep relationships with their NAND customers and are sort of an extension of the NAND makers R&D department, and that may be true, or maybe it's just SIMO talk. We gotta wait for the future and see what happens.
Fortunately so far the trends (away from internal and toward more outsourcing of controller development) has been in SIMO's favor.