Opinions
The Panic-Proof Portfolio (Stockchase Research)
Softchoice
SFTC-T
TOP PICK
Apr 25, 2024
Stock price when the opinion was issued
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SFTC has been relatively flat over the last year and part fo the reason could be attributed to lower hardware demand that is forecasted to rebound in 2024. Despite declining revenues in 2023, SMTC's gross profit margins have improved which is a good sign. Growth forecast for the next two years for revenue is quite marginal for revenue over the next two years while EPS growth is similar. We don't see SFTC having a huge growth profile going forward but the stock could still perform well in 2024. We think there are other more intriguing options.
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The company is striving to bring AI integration to customers thru the Copilot platform of Microsoft across multiple platforms including AWS and Google Cloud. Recently reported cash from operations was $100 million, allowing cash reserves to grow while debt is retired and shares bought back. It trades at 17x earnings and supports a ROE over 90%. Its modest dividend is backed by a payout ratio under 50% of cash flow. We recommend setting a stop-loss at $14, looking to achieve $22 — upside potential of 22%. Yield 1.9%
(Analysts’ price target is $22.08)Our PAST TOP PICK with SFTC has triggered its stop at $18. To remain disciplined, we recommend covering the position at this time. When combined with previous guidance, this will result in a net investment gain of 12%
We reiterate this company that is bringing AI integration to customers of Microsoft across multiple platforms including AWS and Google Cloud. We like that cash reserves are growing, whiles shares are aggressively bought back and debt is retired. It trades at 17x earnings and supports a ROE over 90%. Its modest dividend is backed by a payout ratio under 50% of cash flow. We recommend trailing up the stop (from $14.00) to $15.50, looking to achieve $22 — upside potential of 22%. Yield 2.8%
(Analysts’ price target is $21.75)