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Technology Stocks : Cohu, Inc. (COHU)
COHU 26.01+1.3%3:59 PM EDT

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To: robert b furman who wrote (7417)7/28/2022 12:27:11 PM
From: robert b furman1 Recommendation

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the longhorn

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Earnings out after hours today.

Looks like a C of an ABC corrective 2 wave down of an new impulsive wave up that started after the low of $24.06 on 7/5/22. An unusual day down before earnings (especially after announcing revised upward guidance the week before), my favorite set up going into earnings!

Those who have been here for years note my usual complaint about "up into earnings".

Market makers have MO's. This market maker likes a discount right before a solid run up in price.

Perfect set up for an explosive up wave.

Cohu is set up for a beat on revenue and eps with upbeat guidance on a growing backlog.

Looking back farther, it appears The final C wave of the long ABC corrective decline from the high of $51.86 back in February of 2021 ended with the low of $24.06 on 7/5/22.

So we have started an new up impulsive wave, with 1 of 1completing @ $29.31 on 7/21/22. A quick dip down into the day of earnings and 2 may well complete today.

That would set up 3 of 1 of this new impulsive wave up - which can be long lived and very powerfully up.

It's as if the market waited for Cohu to complete their consolidation and right sizing. Cohu indicated their improved margins recently announced were the result as bringing contract sourced products (from Xcerra's business model) into their more efficient manufacturing facilities in Malaka Indonesia and their facility in the Philippines.

With the now tripled installed owner base boosting their reoccurring consumable sales (with high margins) , and a growing backlog with unusual guidance, it may be time for the market to view Cohu with a higher muliple.

Consensus estimates on Cohu earnings is 71 cents. Annualize that with four quarters and EPS for 2022 could be $2.75 to $2.85. with todays price @ $28.55 we have a multiple of bordering on 10!

A low multiple for a company growing their revenue while also boosting their margins through insourcing and benefitting from inhouse efficiencies.

Their revised mid term target in 1 billion in revenue and $4.00 EPS with free cash flow of 180 million. If and when achieved that would be a multiple of low 7's !

Free cash flow of $3.60 per share and the management can buy back all the shares in less than 8 years.

Now compare that stock buy back program to that of AMAT'S, LRCX's. or KLAC's.

It is a long term ticket to $100.00 plus stock price.

Amassing that kind of cash flow makes them a M&A target, or they can also continue their consolidation of new acquisitions. OR they can reinstitute the dividend.

It would be nice if they boosted the dividend as consistently as they have boosted their employee stock ownership programs.

As stockholders we have been forgotten.

Admittedly they have reduced the debt incurred from the purchase of Xcerra and the dilution of our stock positions with the secondary they issued. A stock buyback program that masks their employee stock options gifting does not impress me.

We as stockholders have been abused!

Its time management becomes more stockholder friendly, as they had been under past managements!

The rest of this day, I'm watching to add to shares with a tight stop at the BB midline at $27.15 .

Enjoy the report!

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